The increase in contract awards seen in mid-2013 seems to be slowing but the CPA/Barbour ABI index is still positive across most sectors
The CPA/Barbour ABI contract awards index was 108 in March, broadly similar to the index in January and February
The pace of increase in contract awards seen in mid-2013 appears to have slowed and contractors appear to be working through projects signed over the last 12 months.
The CPA/Barbour ABI sector indices are still positive across most private sectors. Although contracts awarded for private housing in March fell 7% compared with February, they were 13% higher than a year ago.
With section 106 linking public housing to private housing provision, public housing was only 3% higher than a year ago, suggesting that section 106 is becoming less important.
The indices for commercial hotels and leisure in addition to industrial factories and warehouses were all higher than a year ago, by double-digit percentages, suggesting recovery is on the cards.
Public education work appears to be growing as priority schools and academies work feeds through.
Industrial warehouses sector index
Ripe for recovery
Warehouses is a sector currently ripe for recovery. Activity in the sector hit its nadir in 2013, when output was 68% lower than at the pre-recession peak. Given that the sector is at such lows and that the UK economic recovery has been driven by consumer spending, which should in turn boost demand for warehouses, it is perhaps a surprise that we haven’t already seen the upturn in new warehouse construction.
But, when the financial crisis hit in 2008 there was a surfeit of floor space and until this was used up, the sector was always unlikely to see growth. The CPA/Barbour ABI contracts index for warehouses started recovering last June and in March 2014 was 74% higher than a year earlier. This clearly highlights that developers are keen to take advantage of the recovery in consumer spending, which should be sustained over the next few years.
Ally this to a long-term trend towards internet shopping, which means less retail construction and more warehouses, and the future looks bright. We are forecasting 20% growth in output in 2014 alone and further growth in the following years are expected to leave sector output in 2017 almost 50% higher than it was last year.
Noble Francis is economics director at the Construction Products Association