Government funding filters through to construction starts

The overall year-on-year decline in construction work is easing up, according to the Glenigan Index for July, mainly thanks to strong performances from the public and utilities sectors.

Government funding filters through to construction starts

The Index, which tracks the underlying value of construction projects starting on site, recorded a 16% year on year decline in July, an improvement on the sharp declines of up to a third seen earlier in the year.

Educational, social housing and utilities projects all saw positive signs leading up to July, which partially offset the impact of weak private sector starts.

Glenigan anticipates that project starts across the industry will stabilise further over the remaining months of 2009, albeit at low levels.

Overall the North East, West Midlands and South England regions showed sharp falls in construction work. Only Scotland, Northern Ireland and Yorkshire & the Humber saw a rise in project starts in the three months to July, thanks to increases in public sector and civil engineering schemes.

Private housing starts remain weak, although not as low as they have been and developers have been concentrating on completing existing projects, which explains some of the recent activity.

Allan Wilén, economics director at Glenigan, said: “The fall in new project starts is forecast to moderate over the coming months as the initial impact of the credit crunch eases. However, with the UK economy in recession the flow of private sector projects in particular will remain weak.

“Furthermore, the encouraging pick-up in public sector starts in recent months may lose momentum during the second half of 2009. In particular, based on analysis of projects being tracked by Glenigan we now expect the flow of education and health projects schemes to slow during the remainder of the year. Accordingly while the Glenigan Index should gradually move away from recent lows, the value of underlying project starts will be weak for some time.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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