The construction project starts from a quarter
Project starts fell 24% in the first quarter of 2022, compared to the same period a year ago.
The year-over-year decline was attributed to the ongoing material and energy cost crisis, as well as the impact of the war in Ukraine.
Contract awards were also affected, according to industry intelligence provider Glenigan, down 9% from the first quarter of last year. Large contracts took the brunt of the impact, dropping 43%.
The Glenigan report says the decline was due to “continued material shortages and supply chain disruptions”.
“[Those factors were] intensified by the Russian-Ukrainian war, which continues to affect the construction sector, slowing the pace of recovery,” the report continues.
However, the report adds that a strong pipeline of planning approvals and major contract awards means there is a “generally positive outlook” for the remainder of 2022.
Glenigan, which compiles the rankings of entrepreneurs published by Building News each month, data collated for what it calls the “underlying” market, for projects with a construction value of less than £100m. This threshold omits large, high-value projects that would otherwise distort investment trends.
The sector in general was affected, with the value of private residential construction falling by 37% year-on-year. The value of public housing construction fell 13% from a year ago, and the value of civil engineering works fell 38% year-on-year.
But work in the industrial and office sectors has increased in value.
The demand for warehouses has increased alongside the rise of online shopping. The value of the warehouse sector increased by around 150% in 2022 year-on-year, reaching an all-time high. Project starts in this sector increased by 22% compared to last year, while the value of office projects increased by 1%.
The head of housing policy and planning for the National Builders Federation, Rico Wojtulewicz, said rising inflation meant the industry needed to become “more strategic” about which projects were taken over.
“The cost of competition for supply, how contracts mitigate price increases and material delays, new government policies such as the loss of red diesel and updated building regulations, as well as the decrease in the number of skilled workers add to the decision-making process when fighting for work,” he added.
Glenigan Economics Director Allan Wilen said: “Shockwaves from the geopolitical turmoil in Eastern Europe continue to affect the UK construction industry, but it is crucial to maintain an attitude and an optimistic approach.
He said the sector was by no means the only victim of the conflict and “a little broader perspective will go a long way”.
“While overall performance is not in the position that the industry would universally like it to be, a slight decline in rewards and consents indicates that the appetite to build is there, and we can expect an increase in performance. activity when supply chain pressures ease.
Concerns over the war in Ukraine reflect a warning from Construction Alliance North East (CAN) last month that the effects of the war, combined with rising steel prices and increases in National Insurance, have had “a considerable impact[ed]“SMEs in particular.