Construction activity hits record highs in March

The latest Snap Analysis report from leading construction industry intelligence provider Barbour ABI shows a drop in planning apps in March which could predict a slowdown in construction activity over the coming months.

Tom Hall, Chief Economist at Barbour ABIhas explained : “Planning for the next stages continues to get better and better. It’s great news that planning for later stages has reached record levels, especially in commercially sensitive sectors. We recorded some of the highest levels of contract awards in more than a year in the residential and commercial construction sectors. Major office redevelopments launched in London indicate that for many businesses located in the capital, Covid-induced work-from-home policies could be phased out.

“However, there are many uncertainties and risks at the moment: weakness in the national economy, record tax burden coupled with high inflation, continued shortages of goods, impacts of Brexit and austerity in the public sector. All this increases the risks of a slowdown in construction as summer approaches. We have seen a slowdown in planning requests, which could be a harbinger of this.”

Barbour ABI’s Snap Analysis is a monthly report that dives deep into the three stages of the construction project planning process across the UK across a range of sectors. By including planning requests, planning approvals and contract awards and examining data by industry sector and geographic region, the analysis provides a robust and detailed overview of the construction industry currently and in the near and future. middle term.

The March analysis revealed that construction is currently very buoyant, with a fantastic £8.6bn of contracts completed during the month. This helped the first quarter to reach its highest ever quarterly value, with an average of £7.6 billion worth of contracts awarded each month. The residential construction, infrastructure and commercial construction sectors stood out for contract awards in March.

Residential construction leads the group with £3.5bn worth of contracts awarded in March. This is a 50% increase from the previous month and the highest monthly amount in over a year. Residential construction activity is fairly evenly spread across the UK, with the highest levels seen in Yorkshire, East England, London, North East, North West, Scotland and Wales.

There were also good levels of contract awards in infrastructure construction projects in March, with a total of £2.2bn of contracts awarded; a good improvement from a weak February. This positive result is largely attributable to a £683 million cogeneration plant in London and £197 million for the M54 to M6 link road in the West Midlands.

Strong office building activity boosted the commercial construction sector, which saw £1.3bn worth of contracts in March. Again, this was the strongest month in over a year. Three major office developments in London – 105 Victoria Street, 19-35 Baker Street and the Barclays headquarters development – ​​have been the main drivers of growth in this sector. This could indicate that companies are trying to win employees back to the office after two years of disruption.

The value of contracts awarded in the construction, hospitality and leisure, industrial, healthcare and education sectors suffered in March, particularly in the hospitality and leisure sector, which fell 74% from February.

Looking to the near future with planning approvals, the picture is less rosy, with a 22% drop from February levels. However, the good performance of the residential construction and healthcare sectors allowed March to remain a positive month with high levels of activity.

Major residential projects, including a 500-flat development in the North West and the Vulcan Wharf development in London, contributed to a total of £4.6billion planning applications were given the green light in March .

Infrastructure planning approvals were exceptionally high in February, so March was always going to be lower, however, with £1.5bn of planning applications approved, it was still a positive month for the sector. This continues to be driven by the development of new renewable energy generation and storage facilities.

The level of planning applications approved in the hospitality and leisure sector was positive for the second month in more than a year as signs of Covid recovery begin to flash. However, activity is mainly in convention and sports centres, with hotel development remaining weak.

Health care construction performed very well for planning application approvals in March, registering a 183% increase in February. Cambridge Children’s Hospital in the east of England was one of the biggest contributors with £200million in planning applications approved.

With the longest lead time of the three stages of the construction process, demand planning is the best indicator of where the industry is in a few months. Despite huge planning demand of £17.8bn for the HS2 Crewe-Manchester line, the underlying business is weakening. The situation across all sectors of the construction industry looks much less positive, especially compared to recent record highs in areas such as healthcare.

The value of residential planning applications submitted in February was £3.9bn, while in the infrastructure building segment it was £1.4bn. The commercial sector was weak with just £480m of planning applications submitted and the picture was even bleaker in the hospitality and leisure sector with just £180m of planning applications submitted overall from the United Kingdom.

Education planning applications worth £300m have been made and in the health sector just £120m of new planning applications have been received.

Room added“While the current state of the industry is positive with a lot of activity and record levels of contract awards and planning approvals in some areas, the horizon is more concerning. Overall, the level of planning applications received in March was low and raises questions about the delivery of the government’s commitment to raise the standard of health care across the country and its flagship upgrading programme.

Alice F. Ponder