The underlying value
of construction project starts will fall by 6% this year according to
Glenigan’s latest construction industry forecasts, but the education, health
and civil engineering construction sectors forecast for growth.
Glenigan’s latest
forecasts predict that the fall in construction starts will ease next year but
the outcome of Brexit will be key.
Glenigan’s economics
director Allan Wilén explains: “We are anticipating some retrenchment in
project starts over the next couple of years and the reason is the wider
economy.
“In the initial
aftermath of Brexit, there was a boost to overseas earnings but the City are
looking for decisions from manufacturing in terms of decisions.
“We have also seen
increased pressure on consumer spending, which is having some impact on the
housing market.”
The largest growth
this year is expected to come from the health sector with starts forecast by
Glenigan to rise 15% this year.
Mr Wilén says:
“There were health projects 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 expected to increase by 8%, as construction schemes such as the High
Speed 2 rail link and the Thames Tideway project get underway.
The only other
sector where construction starts will rise this year is education with an 11%
increase this year boosted by student accommodation work.
“This has been a
growth area for a number of years and the development pipeline is strong,” adds
Mr 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.
Mr Wilén adds: “This
is a natural move from student accommodation and there is a strong pipeline of
work here too.”
Glenigan’s industry
analysis shows more than £700 million-worth of PRS projects comprising in
excess of 4,500 units starting on site in 2017.
Despite the growth
in private rented work, private housebuilding construction starts will fall by
13% this year. There will also be a double-digit fall in social housing.
Improvements are expected in both in 2019, although only social housing is
expected to grow, and then only marginally.
However, Peter
Andrew, deputy chairman of the Home Builders Federation, said that poor weather
earlier this year slowed work on site and that the underlying scenario for the
private housebuilding sector remains strong.
Mr Andrew said:
“Planning permissions are very strong. We have been trending for the last 12
months of 340,000 to 350,000 consents for new homes per year and that trend is
continuing.”
Glenigan’s data
bears this out with the value of private residential planning approvals rising
by 6% last year.
The office sector
will also improve in 2019 despite an expected 7% drop in the value of
construction starts this year.
Jon Neale, head of
UK research at Savills, said: “In 2019, companies will be facing a real
shortage if they are looking to move. Developers will look at that and say
‘should we be looking to build again?' and volumes will come back.”
After a year of
uncertainty, next year will bring gradual but fragile improvement across the
industry according to Glenigan’s forecasts.
