Report shows hope for construction industry rebound following political uncertainty

Glenigan Index shows hope remains for a summer rebound for construction industry, despite political uncertainty.

Data from the Glenigan Index reveals that the snap election has caused a marked impact on the industry with new project starts in the three months to May down 8% on the period last year. Non-residential projects were particularly hard-hit, with falls in offices, retail, hotel & leisure, education and community & amenity projects, contributing to a fall of 17% in new starts across the sector.

Due to the outcome of the vote, it is unclear how long it might take the industry to get back on track. There were a number of public sector projects which were put on hold ahead of the voting day, particularly in the education and community and amenity sectors, which are now expected to go ahead.

Industrial building starts, which have continued to strengthen, should also contribute to a pick-up in project starts over the Summer. Private-led sectors such as retail, offices and hotel & leisure may be more dependent more on political and consumer sentiment.

Share prices of major quoted housebuilders and property groups were hit by the election result and the prospect of a hung parliament, although they were quick to recover. FTSE 250 housebuilder Crest Nicholson has since warned that the election result may bring some short term uncertainty, although it expects the new build homes market to remain robust.

The latest Glenigan Index suggests new housing activity may ease off slightly over Spring, following healthy rises during every month since January. New residential starts in the three months to May were down 3% on the period last year, reflecting a stabilising in private starts and fewer social housing starts, which fell 8% on a year ago.

Evidence shows that the private housing market is cooling, with mortgage approvals down 6% in the three months to May on the previous quarter, according to the Bank of England and Halifax figures show house prices in the quarter to June rose just 1.2%, the slowest rate since the end of 2014.

Civil engineering was highlighted as a strong spot in the industry. The Glenigan Index for civil engineering rebounded sharply in the quarter to May, with a 13% rise in new starts, compared to the period a year ago. An increase in utilities work enabled the sector to offset a dip in new infrastructure starts.

The index also showed marked regional variations in new development, with activity in London continuing to slow whilst it picks up in key English regions. New project starts fell by 35% in the capital in the three months to May on the period last year, whilst they rose by 48% in the North East, by 39% in the North West and by 22% in the East of England.

In Scotland, where new project starts fell by 23% in the quarter to May, private sector sentiment may benefit after the election result has made a second independence referendum less likely.

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