By Daniel Hunter
Increased private sector activity has propelled UK construction recovery in the three months to October, according to new figures released by industry analysts Glenigan.
The Glenigan Index, which covers the value of projects starting on site from August to October this year, is up 6% compared with the same period in 2012, driven mainly by strong performances in the retail, office and industrial sectors.
Private non-residential projects starting on site have rebounded strongly following the slowdown seen earlier in the year, with industrial starts increasing by 36% and office starts by 28%.
The civil engineering index also rose by 50%, as the value of underlying starts improved for both infrastructure and utilities, up 44% and 58% respectively on the same three months last year.
Retail saw the sharpest growth of 73%, although this came against a low base as starts in the sector dissipated in the second half of 2012.
In contrast, government funded areas such as health and community and amenity remain weak, mired by ongoing austerity measures.
The monthly Glenigan Index is based on extensive research of every construction project starting in the UK over the previous three-month period and provides an indicator of developing activity in the industry.
Allan Wilén, Economics Director at Glenigan, predicts continuing optimism over construction recovery going into 2014.
He said: "The upturn in project starts is forecast to continue, with increases across most sectors. There is increased confidence of a broad-based UK economic recovery and private sector activity will remain strong.
"Private non-residential project starts are set to improve strongly over the next six months. Supply of office space is already tight in many cities and further economic recovery will increase demand further, while encouraging investment. Retail starts are set to continue to rise in response to increasing sales volumes and signs of consumer confidence."
He added: "These increases have been accompanied by rises in business sentiment and lending, as well as improving national economic data."
In contrast to the other private sectors, hotel and leisure starts are down 14% on a year ago.
Allan said: "Consumer confidence is increasing but most remain cautious; small increases in leisure spending have not yet led to demand for new developments. In addition, councils have reduced spending on leisure facilities in response to tight budgets.
"Growth in hotel and leisure starts is not expected until the beginning of 2014."
Subdued government spending also continues to hamper progress in the health and community and amenity sectors, which saw further falls in starts. Social housing fell by 4% and education fell by 11% in the three months to October.
Despite these falls, the sectors have been relatively resilient during 2013. Social housing starts have been largely flat, but positive data on contract awards and planning approvals suggests that providers are adapting their funding streams to reductions in government support.
Meanwhile, the education sector has seen increases in starts this year due to the early stages of the Priority School Building Programme (PSBP).
"Largely publicly funded sectors such as health will remain subdued over the medium term," Allan said.
"However we are forecasting an improvement in the education sector as projects from the PSBP help boost starts and local authorities address the shortfall in primary school places."
Private housing starts have been on the increase since April this year; however starts fell by 5% in October. This is expected to be a temporary dip with growth to resume in the near future.
Allan said: "Confidence in the wider housing market is improving, with the flow of mortgage approvals strengthening and house-builders reporting increases in net reservations and sales, in part supported by government initiatives such as Help to Buy.
"The prospects for social housing are less certain. Starts are forecast to decline during 2014 but there are signs that the government's affordable housing programme may bring greater help to the sector as market conditions improve."
The North East recorded the sharpest growth in project starts, up 72% against a year ago. Strong growth in starts was also seen in Northern Ireland, up 31%, and London, up 51%. Glenigan recorded other healthy improvements in the South West, West Midlands and Scotland.
The sharpest fall in starts was in Wales, down by 60%, which marks the unfortunate milestone of 12 months of consecutive declines in the region. Starts in the South East were also weak, falling 22% on a year ago, with a more modest decline seen in Yorkshire and the Humber.
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