A regional analysis
of construction contract awards has revealed a slowdown in the residential
sector, questioning how effective government action has been at increasing
housebuilding to its 300,000 per year target.
Last year saw a
reduction in residential contract awards in a number of areas across the UK,
outweighing the number of regions which saw an increase in residential
contracts.
The ‘Regional
Construction Hotspots in Great Britain 2019’ report from Barbour ABI and
the Construction Products Association (CPA) provides a regional analysis of
construction contract awards, accounting for local trends and particularities
that aren’t always reflected at a national level. By analysing the value
of contracts in regions across residential, infrastructure and commercial
sectors, the report identifies ‘hotspots’ and ‘coldspots’ as pockets of growth
or contraction over the near-term horizon.
While the report
shows ‘coldspots’ in the residential sector outnumbered ‘hotspots’ in 2018, it
also shows that unlike previous years there were no residential ‘coldspots’ in
London, suggesting that the slowdown in house price growth and consequent diminishing
in developer appetite is spreading out across the country.
As well as growth in
residential, Scotland and the South East saw growth in contract awards in
commercial and infrastructure, contrasting the slowdown in construction new
orders on a national level. Growth in Scotland was in large part down to the
Moray Firth offshore wind farm (£1.8 billion) and the Highland main line phase
2 (£250 million) - two of the country’s largest infrastructure contract awards
in 2018. While the South East’s hotspots were driven by the £250 million
Buckholt Lane business park in East Sussex as well as airport and smart
motorway improvements for Gatwick Airport and smaller-scale office
redevelopments in the counties surrounding London.
Rebecca Larkin,
Senior Economist at the CPA, commented: “A cooling in house price growth has
formed residential coldspots across the country and despite the government’s
demand side stimulus and ambitious supply side goals, a slowdown in activity in
a market dominated by private sector house builders may not be avoided. In
addition, Brexit-related uncertainty means investors are still wary of
committing to large upfront outlays. Illustrating this, construction on Spire
London, the largest residential contract award in 2018 by some way, has been
paused for review given the significant weakening in prevailing market
conditions, particularly for high-end property in the capital.”
Tom Hall, Chief
Economist at Barbour ABI, commented: “While we saw a cooling off in the
residential market, 2018 saw somewhat of a resurgence in the commercial sector.
There were several significant hotspots across the UK, especially in the South
East, East Midlands and North West. The majority of this growth was due to the
warehousing subsector which saw a large increase in new contracts as consumer
activity continued to move away from the high street. Overall the South East
and Scotland had the highest number of hotspots, mainly in the commercial
sector but also in the residential and infrastructure sectors.”
