Hotels and leisure and the health sector were the only areas of the market to see an uptick in construction activity in the three months to the end of January.
The latest index from construction insight firm Glenigan shows a frustratingly slow start to the year for the sector overall, as investors continue to show caution in the face of a weak economic outlook.
The value of underlying work starting on-site across the sector in the three months to the end of January was down by 31% on the same period last year. The January figure was down by 20% on the preceding three months as inflation and economic uncertainty continue to bite, tempering investor sentiment.
Hotels and leisure and health were the only sectors to show an uptick, up by 16% on the preceding three months. However, they failed to show a year-on-year improvement.
Industrial project starts were particularly weak, down by 34% on the previous three months and down by 45% year-on-year.
The index covers all underlying projects, with a total value of £100m or less.
Glenigan economic director Allan Willen said: “The weakening in project starts at the start of the year is disappointing but unsurprising.
“The depressed economic landscape and a significant slowdown in the residential market is having a sizeable, negative impact on the entire sector. This downturn will, no doubt, have prompted many contractors and developers to review and postpone start dates until a greater degree of fiscal certainty returns to the market.”
He added: “Nevertheless, there are some bright spots, with civils starts up compared with last year. Hopefully, this indicates that the tides are gradually turning, particularly from the government’s recent decision to invest in large-scale infrastructure projects throughout the rest of their term in office.”
The report comes as Deloitte’s latest crane survey shows that alternative sectors such as hotels and student accommodation boosted construction activity in major regional cities last year.
Sector analysis
Residential: Construction experienced overall decline in the three months to January as starts fell by 26% to stand 38% lower than a year ago.
Private housing experienced a weak period, down by 34% compared with the previous year and 28% lower than the preceding three months. Social housing also had a steep fall, with work starting on site dropping by 21% against the previous three months and plummeting by 49% on 2022 levels.
Non-Residential: Almost all non-residential sectors experienced poor performance. Hotels and leisure and health were the only sectors to advance against the previous three months, rising by 16% respectively, but failed to increase against last year.
Industrial project starts were particularly weak, declining by 34% during the three months to January to finish 45% lower than a year ago. Retail also fared poorly, with the value of project starts falling back 29% against the preceding three-month period and 33% against the previous year.
Education project starts fell by 19% against the preceding three months to stand 31% down on the year before.
It was a similar story for office starts, which had previously experienced a burst of activity, with the value of underlying project starts tumbling by 26% against the preceding three months to stand 7% down on the same time last year.
Community and amenity also suffered, down by 27% against the three months to January and 26% compared with 2022 figures.
Civil enginering performance slipped back by 3% but experienced a modest 5% increase against the year before. Utilities starts fell back by 8% against the preceding three months but were 26% up on a year ago. In contrast, infrastructure starts declined by 4% on the previous year and remained flat against the preceding three months.
Regional: Performance was poor. However, the North East performed relatively well compared with the rest of the UK, with project starts increasing by 20% during the three months to January but faltering on a year ago with a 16% decrease.
Likewise in the South East, the value of project starts increased by 19% against the preceding three months but remained significantly behind the previous year’s results.
London and the South West performed particularly poorly against the preceding three months, falling by 23% and 24%, respectively. Both regions were down on the previous year, remaining 36% and 39% lower than a year ago.
Scotland suffered heavy falls in project starts, declining by 45% against the previous three months to stand 42% down on a year ago. This was also the case in the East Midlands, West Midlands and the North West, which all crashed compared to the preceding three months and last year’s performance.
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