Small falls highlight the usual slowdown at the end of the year, but there were wildly different fortunes across the different construction sectors

The CPA/Barbour ABI index for contract awards in December fell by 2% compared with November and was 3% lower than a year earlier: small falls that highlight the usual slowdown at the end of the year.

There were wildly different fortunes across the different construction sectors, though. Private housing contract awards continued to pick up in December after a blip in the autumn and then rising in November. Public housing and education contracts both fell in December and although commercial retail rose significantly, it was offset by falls in new contracts for commercial offices, hotels and leisure in addition to falls in industrial factories and warehouses.

Although the new year should be about positivity, the main focus appears to be on dealing with uncertainty – about the economy, politics and Brexit. And construction’s way of dealing with it in most sectors seems to be by getting on with the day job. That is probably no bad thing until we get some clarity. 

Commercial offices sector index: Sharp falls ahead

Taking a look across the skyline in London, Manchester and Birmingham, there’s a raft of towers under development and it’s hard to believe that new commercial offices contract awards have fallen so much over the past year. But there tends to be a 12-18 month lag between contracts for new high-profile office space and the construction activity on the ground.

So, work on site now is still based on projects signed up to before the EU referendum. While the vote to leave the EU has not yet impacted on most construction sectors to a large extent, it has had an impact on up-front investment in high-profile towers, particularly from international investors. And, as the projects signed up to pre-referendum finish, there certainly are not enough projects to maintain activity on the ground, which has already started to fall and is expected to fall in both 2018 and 2019.

The CPA/Barbour ABI commercial offices contracts awards index was 34% lower than one year ago. Activity on site still remains high by historic standards but, given this fall in new contracts of more than one-third, we should expect double-digit falls in offices activity this year and next. 

Noble Francis is economics director at the Construction Products Association

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