Builders' Merchants News

Construction up 10.5% in supermarket and private housing surge

Published:  24 May, 2010

UK: The value of construction projects starts in the three months to April 2010 was up 10.5% on the same period a year ago, according to the Glenigan Index for April. The Index, which tracks the value of projects under 100m, showed a increases in private and social housing, retail, education and health projects starts.

"The construction industry will be looking to a continued rise in private sector work over the coming months with public sector expenditure cuts looming and disruption following the result of the general election," said Allan Wilen, economics director, Glenigan.

Supermarket developments and private housing were key growth areas in the three months to April. The value of supermarket developments were double that of a year ago and private housing project starts were 41% up on a year earlier, although this comparison is against the trough of the recession.

Mortgage applications appeared to be dampened by pre-election uncertainty, but market conditions are expected to improve throughout 2010.

Continued weakness in the industrial and office sectors was partially offset by hotel and Olympic-related schemes.

The underlying value of health and education projects increased compared to a relatively weak period in the three months to April 2009 despite a slowing in government-funded projects.

Civil engineering project starts re-bounded following a weak start to 2010. The Glenigan Civil Engineering Index was down 4% in April 2010, compared to 36% and 24% in February and March 2010 respectively.

Mr Wilen said: "Civil engineering was boosted by an increase in utility projects, however growth was tempered by fewer road and rail projects."

Regionally, project starts increased considerably in the Midlands and North East. Northern Ireland, the South West and South East of England were the only regions to record a fall in project starts against the same period a year ago.

Looking ahead Mr Wilen commented: "A further strengthening is anticipated over the forecast period to the second quarter of 2012.

"Weak industrial and office sectors will remain a drag on project starts over the next few months.

"However, conditions in the industrial and commercial property markets have moved off the low point reached in the first half of 2009.

"We can see that housebuilders are keen to capitalise in recent improvements in market conditions, although weak household earning and consumer confidence combined with limited mortgage availability will restrict the pace of recovery in new house sales and project starts during the remainder of 2010."

Considering the public sector Mr Wilen said "The growth in project starts seen since April 2009 has started to lose momentum. The result of the general election has disrupted the flow on projects in the short-term and the impact of government funding cuts will be felt in the medium-term."