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Public sector holds back construction recovery

A drop in public sector activity held back construction sector recovery for the three months to August

Private housing and civil engineering starts rose during the period but were offset by a drop in social housing and non-residential building projects, according to Glenigan. Its project starts index remains unchanged overall, compared to the same period last year.

Private housing starts were up 18 per cent year on year. However, non-residential building projects were 12 per cent lower as double digit declines in the office, health and community & amenity sectors overshadowed a rise in industrial projects.

An increase in infrastructure and utilities schemes helped boost civil engineering starts, which were up 25 per cent on a year ago. Civil engineering starts are forecast to strengthen further during the second half of this year and next year, supported by an increase in transport and energy projects.

Glenigan economics director Allan Wilén said that although there had been a recent pause in the flow of private sector projects the latest figures showed clear signs of renewed growth.

‘The 18 per cent rise in private housing starts is especially encouraging,’ he said. ‘Confidence in the wider housing market is improving, with the flow of mortgage approvals strengthening and housebuilders reporting increased sales, in part supported by lending schemes such as Help to Buy.

He added that the market recovery was expected to gather further momentum over the next 18 months, driving more growth in private housing starts.

Wilén said that office, industrial and retail starts were all lower in the first half of this year compared to the same period in 2012. However, the rise in industrial project starts reflected an improving sentiment, which was likely to spread to other sectors for the rest of this year and 2014.

Sectors with a high reliance on public funding such as health and social housing would continue to decline in the medium term, Glenigan forecast. However projects from the priority schools programme would boost the education sector.

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