Glenigan sees positive indicators of improvement in construction industry

The number of construction projects starting on site rose in May, according to the latest Glenigan Index. The improvement saw the year-on-year rate of decline fall to 25% compared to falls of 35% for March and 30% for April.

Early leading indicators are said to be even more encouraging. Construction projects going out to tender in May averaged 38 per day in May 2009 compared with February’s low of 30 projects a day. This is a 27% increase on the back of a sharp fall over the previous 18 months.

Most of the new work has been smaller public-sector projects and jobs associated with major Government projects.

While a high number small projects indicates that conditions are still challenging, Glenigan forecasts that the value of underlying construction project starts during the second half of 2009 will be little changed on a year earlier. That is much lower than two years ago, but encouraging after an estimated 24% year-on-year fall during the first six months of 2009.

In the housing market, developers will remain focused on building out and selling existing projects rather than opening up new sites.

Encouragingly, the number of social housing projects starting on site increased in May, suggesting that the promised Government funding is starting to filter through.

Construction projects in the education and community/amenity sectors increased during May 2009, providing further evidence that additional Government funding is starting to accelerate planned projects. This is much needed relief from the industrial, office and retail sectors, where the value of underlying starts is less than half of a year ago.

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