December Construction Index Reports Continuing Decline

GLENIGAN’S December 2021 Construction Index reveals persistent decline, however recovery is on the horizon.

The value of work commencing on-site during the 3 months to November fell 13% against the preceding three months to stand 20% lower than the previous year.

December Construction Index

The Index covers all projects with a total project value of £100 million (or less), with all figures seasonally adjusted. It provides analysis of year-on-year construction data, giving insight into sector performance over the past 12 months.

The downward trajectory of December’s report was first registered over the summer.

Sector Analysis

Particularly hard-hit, the value of residential work on-site fell by more than a third (34%) against the same period in 2020, and 15% against the preceding three months to November 2021.

Looking closer, private housing construction starts performed poorly, dipping by a fifth (21%) against the preceding 3 months to stand 37% lower than 2020 levels. Although social housing starts increased 1%, the value dropped more than a quarter (-26%) against the previous year.

This is indicative that supply chain issues continue to negatively affect the sector.

Other sectors also saw sharp falls in start output in the three months to November 2021, when measured against the same period in 2020. This includes: Civils (-31%), Infrastructure (-36%) and Health (-40%).

Slightly less impacted, office project starts fell 20% against the preceding 3 months to November, however they did show an increase of 14% on the previous year. Likewise, although Health and Leisure starts declined 10% against the preceding 3 months, they increase 25% against 2020. Both continued to remain lower than 2019 levels.

Strongest Performer

Bucking the downward trend, Industrial project starts were by far the strongest performer in this edition of the Index, increasing 11% against the preceding three months to stand 22% higher on 2020. This made it the only sector to experience dual growth against the previous three month period and a year ago.

Material Shortages

Despite generally poor performance, economic indicators suggest this period of general decline is a relatively short-term situation, exacerbated by global material shortages and supply chain issues.

Recovery Potential

Forecasts, including Glenigan’s own, point to start figures surging in the New Year, should these issues be overcome. Strong planning approvals and contract awards, registered in the November Construction Review predict a strong pipeline of upcoming work to help the construction industry back to pre-Pandemic levels of output.

Regional Performance

Regional performance in the December Construction Index was decidedly mixed in the three months to November. Only a handful of regions experience growth, including the East Midlands where project starts increased 3% against hr previous year and 7% against the preceding three months. Northern Ireland was the only other area to witness growth against both the previous year (20%) and the preceding three months (10%).

Although the North East witnessed 4% growth against the previous year, value has fallen 19% against the preceding three months. Vice-versa, London fell by 8% against the previous year, but increased 2% against the preceding three month period.

It was a bleaker picture across the rest of the UK. Scotland experienced the worst three months to November, with the value of project starts falling by over a half (58%) against the previous year, and 48% compared with the preceding three months to November. It was a similar story in Wales, down 51% against 2020 figures. This was echoed in the East of England (-25%), North West (-22%), South East (-24%) and West Midlands (-20%).

Glenigan Senior Economist, Rhys Gadsby said, “Following a relatively stable third quarter for starts on projects under £100m, the first two months of Q4 have fallen sharply, especially in November where starts were at their lowest level since May 2020.”

“Anecdotal evidence suggests that some builders are delaying starting new projects due to the schedules of existing projects, already on-site, being severely disrupted by material and labour issues. These issues are likely to hold back project-starts in the near term, however, with main contract awards and detailed planning approvals strengthening, and as material and logistical constraints ease, it is expected that project-starts will start to lift during 2022.”

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