The CPA/Barbour ABI Index for December shows a recovery in construction driven by private housing
Prospects for construction continued to rise in November according to the CPA/Barbour ABI index, which at 125 was 11% higher than a year ago, broadly similar to October’s figure. As the index measures contracts awards, it is a forward-looking indicator for activity in the industry. Activity in Greater London and the South-east continue to dominate but activity in the North-west is also rising, especially around the M62 corridor. In terms of sectors, contracts in private housing in November were 16% higher than a year ago and suggest that the recovery in the sector will continue well into 2014 as housebuilders seek to take advantage of the rise in demand from Help to Buy while it is in place.
However, it is not just private housing driving the recovery in construction. Public housing, education, offices, retail and leisure all rose. And this is vital if the construction recovery is to be maintained in the medium-term.
Commercial retail sector index: A better year ahead
Although it may not often make the headlines, commercial is the largest construction sector. In recent years commercial retail has been hit by a long-term trend away from the high street, due to the rise in internet shopping, which accounts for over 10% of retail sales. Also, consumer spending has been hit by falling real wages, which are 9% lower than five years ago. As a consequence, it was little surprise to see that retail construction output at the end of last year was 36% lower than pre-recession. Yet, the recovery in the UK economy since the start of the year, and the positive boost rising house prices has given to consumer confidence, have led to a rise in retail sales.
This suggests that 2014 could be better for retail construction activity. The CPA/Barbour ABI retail index in November was 6% higher than in October and 6% higher than a year earlier despite major supermarket chains slowing down their expansion plans. Furthermore, planning approval has been given for a £1bn shopping centre in Croydon, which we expect to boost workloads and suggests there may also be some major projects around the corner.