Industry should ‘stay positive’ despite post-covid slowdown, expert says

Construction has reasons to “stay positive” despite new data showing the industry’s explosive growth at the beginning of this year is continuing to slow down, a data expert has said.

The value of project starts dropped by 14% in the three months to the end of July compared to the previous quarter, according to information provider Glenigan’s August review.

Planning consents also fell by a fifth compared to the previous three months, the analysis found, while material shortages show few signs of abating.

But the group’s economics director Allan Wilén said strong pipelines in the months ahead with a number of ongoing major schemes, including infrastructure projects, should calm the nerves of firms concerned that the industry is heading for a post-covid slump.

He said: “There’s no doubt the slowdown seen over the last three months has been the result of a perfect storm of external events, beyond the industry’s control.

“Supply chain issues continue to bite and look likely to remain a challenge for the foreseeable future.

“However, the sector is showing its strength across the board, and this modest slowing of pace is certainly not as serious as many might have predicted.”

Glenigan’s forecast for the remainder of this year and on to 2023 predicted that project starts will see a return to pre-covid levels in 2022, helped by the likelihood of the government announcing a major retrofitting programme in the coming months.

Wilén added: “Whilst we’re not there quite yet, we’re seeing lost ground being made up at a quicker rate than anyone would have predicted this time last year.”

The sudden drop in the value of project starts is the result of a 19% fall in schemes valued at £100m or less, the review found.

It means the average value of project starts of this size is still 24% below pre-pandemic levels.

But the review also found that the value of major project starts has plotted a steadier course and remains largely unchanged, at just 2% below what they were before the pandemic.

And project starts have boomed by nearly 60% in the East of England, which Wilén said was likely the result of huge growth in logistics centres supplying London following increases of online sales during the pandemic.

In Scotland, the review found that project starts had increased by some 124% in the three months to the end of July compared to 2019.

While overall planning consents have slipped by 20% over the past three months, major planning approvals have fallen by a less severe 8%.

Despite main contract awards falling 1% on the previous six months, they are still more than 40% above the same period in 2019, while major contract awards are nearly double what they were pre-covid.

Output is also still increasing across most sectors, with private housing up by more than 10% in quarter two compared to quarter one, and infrastructure seeing the strongest growth at nearly 16%.

But new public residential and non-residential scheme have dipped by 1.5% and 1.4% respectively during the period.

Wilén said that despite the figures showing a clear “cooling off”, some turmoil in the industry is to be expected following the disruption caused by the pandemic.

He added that he expected the figures to become steadier over time as the industry continues its recovery from the pandemic.