April to June has been a hesitant period for the construction industry, and many other sectors, with the general election casting uncertainty over the market, economy and political landscape. While construction starts performed strongly, sending a positive signal to the market, main contract awards and detailed planning approvals have not fared so well. Here, we dive deep into the latest Glenigan Construction Review for April to June 2024…
Taking a view of the UK economy and, despite the positive bounce back seen in the first quarter of 2024, economic growth appears to have stalled in April. GDP (gross domestic product) was unchanged, while a rise in service sector output was offset by falls in manufacturing and construction activity. That said, CIPS surveys do indicate that manufacturing activity returned to growth in May and June, suggesting that the stall may only be temporary. Official data also points to a cooling in the UK labour market, with vacancies falling and unemployment rising.
Looking at the construction industry specifically and detailed planning approvals have decreased by 21% compared to the same period in 2023. Similarly, main contract awards are also down by 34%, when compared to the first quarter of 2024. That said, there is some good news, with project starts increasing by 13% compared to 2023 figures, averaging at £9,247 million per month. Interestingly, major project starts, classed as those with a value of £100 million or above, have increased by 91% compared with the same three-month period in 2023.
Delving into more of the detail and the office sector has seen a positive boost to its development pipeline. While project starts and detailed planning approvals decreased compared to 2023, main contract awards have increased significantly by 46%, totalling £1,958 million. The size and scale of office projects also appears to have shifted, perhaps expected given what we know is happening on the ground, with project starts in the ‘£100 million or above’ value band up by 85% compared to 2023.
Once again, London was the most active regional area for new office developments, with project starts totalling £693 million and accounting for 53% of the total value for the quarter.
Civil engineering is another sector that presents promising signs of growth. Project starts on site increased by an impressive 168% compared to the same period in 2023, totalling £10,368 million. Of these, rail projects accounted for the greatest share at 38%. Interestingly, energy projects have also had a significant boost, now accounting for a 24% share of the civil engineering sector and up by 448% compared to the previous year. While road and water projects have both fallen, only accounting for a 12% and 2% share respectively.
Unlike Q1, where Northern Ireland took the crown, this time it is the East of England that accounts for both the highest percentage of civil engineering project starts (36%) and planning approvals (43%), showing a clear region of positive growth.
