Construction starts show strong signs of recovery

The value of construction-project starts in the three months to April 2010 was up by 10.5% on the same period a year earlier, according to the Glenigan Index for April. The Index tracks the value of projects under £100 million and showed a gradual recovery in private-sector confidence, coupled with a flurry of public-sector work. There were increases in private and social housing, retail, education and health project starts.

Alan Wilen, economics director with Glenigan, said, ‘The construction industry will be looking forward to a continued rise in private-sector work, with public-sector expenditure cuts looming and disruption following the result of the general election.’

Key growth areas in the three months to April were supermarket developments and private housing. The value of supermarket developments was double that of a year ago, and private-housing project starts were 41% up on a year earlier — although this comparison is against the trough of the recession.

Continued weakness in the industrial and office sectors was partially offset by hotel and Olympic-related schemes. The underlying value of health and education projects increased compared to a relatively weak period in the three months to April 2009, despite a slowing in Government-funded projects.

Looking ahead, Mr Wilen commented, ‘A further strengthening is anticipated over the forecast (to Q2 2012). Weak industrial and office sectors will remain a drag on project starts over the next few months. However, conditions in the industrial and commercial property markets have moved off the low point reached in the first half of 2009.

‘We can see that housebuilders are keen to capitalise on recent improvements in market conditions, although weak household earning and consumer confidence, combined with limited mortgage availability, will restrict the pace of recovery in new house sales and project starts during the remainder of 2010.’