The UK construction market is still feeling the effects of uncertainty following the general election with falls in activity for the third consecutive month, according to figures released today by industry analyst Glenigan.
The Glenigan Index for July, which covers the value of projects starting on site during the three months to June, has declined by 24% year on year as housebuilding, office, retail and civil engineering activity contracted sharply.
The fall was prompted by decisions on government funded projects being postponed in the immediate run-up to the election and by private developers delaying project starts until the political outlook was clearer.
“Pre-election jitters continued to dampen project starts in the immediate aftermath of the election. The current dip in project starts will hold back the pace of output growth this year,” said Glenigan economics director Allan Wilén.
According to Glenigan’s data, civil engineering projects have seen the sharpest decline, with the value of underlying project starts plummeting 46% against a strong performance in the second quarter of 2014.
Non-residential starts also contracted sharply, being 20% lower than a year ago. All non-residential building sectors contracted, with offices suffering the sharpest fall to just half the level seen a year ago. In contrast industrial projects held-up relatively well, slipping just 1%.
Government funded areas also declined with the value of education and health starts dropping by 14% and 25% respectively.
Wilén believes that the election result has reduced political uncertainty in the near term and he anticipates a bounce back in private sector project starts over the coming months as investor confidence returns.
Nonetheless, Wilén has said that there are still concerns over the pipeline of work for the civil engineering market. “The government has announced both a scaling back of Network Rail’s capital programme and the early removal of support for on-shore wind farms,” he explained. “This suggests that the flow of civil engineering projects will be increasingly constrained over the next two years
“We also expect public sector funded work to be constrained by government efforts to tackle the budget deficit. A clearer picture may emerge following the forthcoming ‘emergency’ budget.”