Data from the CPA/Barbour ABI index shows that construction contracts went up 11% in September
The CPA/Barbour ABI index shows that the number of new construction contracts rose in September, after a slight dip in July and August. The index hit 118 in September for total construction, 11% higher than August, and also 7% higher than a year ago.
Earlier in the year, housing was the sector driving recovery and it continued to grow in September. Private housing contracts rose 2% last month compared with August and were 26% higher than a year ago. However, September’s data highlights that the optimism is spreading into other private sectors: contract awards for new offices, factories and warehouses all rose significantly.
Conversely, public sectors continued to be very subdued, especially within the health sector, outside Procure21+ work. Education work has picked up thanks to university projects, priority schools and academies. However, levels are still considerably lower than three years ago.
Warehouse sector index: Waking the shed
Although the focus in construction tends to be on housing or commercial, the worst affected sector has been warehouses.
Output in 2012 was 60% lower than at peak, in the mid-2000s, and it continued to fall during 2013 due to excess floor space all around the country and the decline in consumer spending.
However, the CPA/Barbour ABI Warehouses index suggests that the sector may, finally, be ready for a revival, albeit from a very low base. Averaging 150 over the past four months, the sector has been boosted by the £400m Doncaster inland port, which includes considerable warehouse facilities. This should feed through into output over the next 9-12 months.
Looking further forward, the index suggests that further medium-sized projects are in the pipeline and, although it is too early to call a sector recovery for certain, recovery in consumer spending and the wider economy should lead to a rise in new warehouse construction. Our forecasts anticipate the sector growing 3% next year before averaging 5% growth each year afterwards.
Noble Francis is economics director at the Construction Products Association