Construction industry overcomes shortages of materials and skills – Show House
Today, Glenigan released the October edition of its Construction Index, which shows the industry is beginning to overcome material and skill shortages.
Project start-up level rally
Although all project start-ups slowed down regularly in T.2 and T.3, after a first surge in the first quarter, the momentum seems to be strengthening again, with an upturn in activity recorded in September.
In addition, the development pipeline remained strong throughout the year, especially for some non-residential sectors, notably industry.
Major contracts awarded have increased over the past eighteen months since the first nationwide lockdown in March 2020 and detailed planning approvals still remain high.
Complemented by improved business conditions as well as increased consumer and business confidence, Glenigan’s economics team predicts that these conditions combined will lead to project start-up growth in the coming months and through 2022.
Commerce and industry
Non-residential projects showed considerable strength in the third quarter, increasing 44% from the previous year and 7% from the same period in 2019. In addition, the value increased by 10% compared to the previous quarter.
The industry stood out during the period, up 152% from the previous year and 66% from the second quarter of 2021, up 101% from the third quarter of 2019.
Projects launched included the £ 76million East Midlands distribution center in Castle Donington, the £ 60million Ivory Infinity Park also in Derbyshire. Additionally, manufacturing projects including the new £ 82million wind turbine plant for Siemens at Alexandra Dock, Hull, and the £ 40million advanced manufacturing facility for Unilever at Sharnbrook, Bedford.
Office starts were also strong, up 7% from the second quarter and 43% from a year ago and 9% from the third quarter of 2019.
Looking more deeply, healthcare increased in the third quarter, compared to the same period 2020 and 2019. Healthcare projects increased by more than half compared to 2019 (57%), with housing starts up 6% from 2020 and 14% from the second quarter of 2021.
Commercial starts rose 38% in Q3 from 2020 levels, with an 8% increase over the same period in 2019. Hotel and leisure project starts increased by compared to the previous year but have fallen sharply compared to the same period in 2019 (-27%).
Room for improvement
The value of residential works started on site during the third quarter of 2021 fell by more than a quarter (27%) compared to the previous quarter (SA) and by 12% compared to the previous year.
Residential starts remained well below 2019 levels, with value down by a third (34%). Private housing starts were down 6% from the previous year and 33% from the previous quarter (SA). In addition, private housing starts fell 38% compared to the same period in 2019. The weakening in private new housing activity may reflect expectations of a cooling housing market over the next decade. the year to come.
Social housing starts fell 10% from the previous quarter (SA) and 24% from the previous year. Social housing starts fell 19% from the same period in 2019. The spending review later this month could see additional funds spent on building more social housing.
Looking across the UK region by region, the North West took the lead in the third quarter, achieving the strongest year-over-year growth (45%). It is also the only region that has seen growth compared to Q.2 2021, with project value up 7%.
The West Midlands was another growing region from the previous year, with the value of projects initiated increasing 13%. And this despite a decrease of 10% compared to the previous quarter.
London has performed relatively well, with the value of the project increasing 22% from a year ago. However, this value was down 11% from the previous quarter.
Project starts in the East Midlands were down only 3% from the previous year, but saw sharp declines from the previous quarter on a seasonally adjusted basis (-36%) and the third quarter of 2019 (-39%).
Project starts have been particularly poor in Northern Ireland, Wales, Yorkshire and the Humber and the North East.
Glenigan Senior Economist Rhys Gadsby said: “It is encouraging to see growth start to return to the sector after the first quarter surge stabilizes in spring / summer 2021. There are a number of major online projects moving the industry forward, however, residential numbers remain low as lingering issues with on-site skills, materials and the shortage of heavy-duty vehicles negatively affecting the business. Against this background, it will be interesting to see if this relatively poor performance can be reversed now that there is a new team in the future MHCLG.