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Industry watchers predict construction will go into decline this year

Housing down downturn drop
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New data produced separately by Glenigan and the Construction Products Association (CPA) has lifted the lid on the extent of the downturn in the building industry

According to leading industry tracker Glenigan, the total underlying value of construction project starts will fall by 6 per cent by the end of this financial year with the value of private housebuilding schemes getting under way set to drop by 13 per cent over the same period.

Meanwhile, the CPA has said that construction industry output will decline this year for the first time since 2012 – a 0.6 per cent dip on 2017 and the first year-on-year decline for six years. The association said that sharp falls in the commercial sector, particularly the office and retail markets, were expected to drag down overall industry output.

These findings are backed up by Glenigan’s own research, which predicts a 7 per cent drop in the value of construction starts on new offices this year.

Glenigan’s economics director, Allan Wilén, said: ‘We are anticipating some retrenchment in project starts over the next couple of years and the reason is the wider economy.

‘We have also seen increased pressure on consumer spending, which is having some impact on the housing market.’

We are anticipating some retrenchment in project starts and the reason is the wider economy

However, Glenigan is predicting that, depending on the outcome of Brexit negotiations, the current slowdown in construction starts will ease later next year. It said it expected growth in the education and civil engineering sectors, with a huge 15 per cent increase in the value of health sector starts.

Wilén added: ‘Health projects were deferred, due to the snap general election. Those projects are now going ahead. There is also more money in the NHS. The challenge is how much of that money will be used for capital investment.’

Civil engineering work is set to increase by 8 per cent, as construction schemes such as the High Speed 2 rail link and the Thames Tideway project get under way.

The only other sector where construction starts will rise this year, says Glenigan, is in education, with an 11 per cent increase predicted this year, boosted by student accommodation work.

’This has been a growth area for a number of years and the development pipeline is strong,’ said Wilén. ‘There is strong demand from students and investors for these schemes, with the backing of universities.’

A trend for younger people to continue renting after leaving university is expected to drive the built-to-rent work in the private housebuilding sector. Wilén said: ’This is a natural move from student accommodation and there is a strong pipeline of work here, too.’

Housebuilding could bounce back later in 2019. The latest Glenigan data shows that the value of private residential planning approvals rose by 6 per cent last year. 

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