Construction activity shifts from public to private sector

Glenigan Index, Market survey

With fewer public-sector projects started on site following the General Election the value of construction projects starting on site in the three month to May 2010 fell back to below 2006 levels — according to the latest Glenigan Index. However, the index for May was 10% up on a year ago, but lower than the index for March and April this year.

Allan Wilen, economics director with Glenigan comments, ‘The construction industry will be looking to the private sector as Government-funded schemes come under reducing pressure in the coming months.’

Residential project starts in the three months to May showed a clear divergence between private- and public-funded projects. ‘The value of private housing projects starts remained 58% up on a year ago, while social-housing developments fell back from the surge seen in the first quarter. This pattern is forecast to continue in the coming months as housebuilders look to capitalise on gradually improving market conditions, and social-housing starts remain under pressure — according to Mr Wilen. The Glenigan residential index remained 26% higher than a year ago, but fell back from the rise seen in the past two months.

There have been marked difference in regional construction trends in recent months. There has been a sharp divergence in project starts over recent months — with Scotland, Wales and the north of England enjoying a sharp rise in project starts compared to a year ago. In contrast, the flow of project starts has been at best flat in the south of England.

Looking ahead, Allan Wilen comments, ‘The recent pick-up in private housing, retail, hotel and leisure projects will continue to be tempered by low levels of activity in the industrial and office sectors over the next few months. However, conditions in the industrial and commercial property markets have improved, and a more widespread strengthening in private-sector activity is forecast over the next two years. In contrast, Government funding cuts will restrict the flow of new public-sector schemes over the medium term.’

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