The cost of living crisis, inflation and supply chain issues are adversely affecting the construction industry, says Barbour ABI in its latest monthly Snap Analysis report.
The report compiles data from each sector of the construction industry in the UK and from each stage of the construction pipeline and is therefore able to provide a holistic picture of the industry in the short, medium and longer terms.
Contract awards
The best indicator of the short-term health of the construction industry is the level of contracts being awarded. Overall, the level in June was positive with £6.8bn worth of contracts awarded.
This took the Q2 value to an average of £5.9bn, which is largely in line with the recent average and indicates that new projects are moving forward but at a slower rate than in recent times.
June’s figure is largely driven by £2.3 billion worth of infrastructure contract awards. There were two prison contracts awarded in addition to the £1.25 billion contract for the A303 Stonehenge tunnel.
Industrial construction contract awards fell back to £600m in June, but the Q2 average is a very strong £900m, thanks to £2 billion worth of contracts awarded in Apr and May.
Planning approvals
The level of planning applications receiving approval is the best indicator of the medium-term health of the industry. June recorded the lowest value of planning approvals since February at just £5.4 billion overall.
Residential (-24%) and infrastructure (-50%) both experienced significant drops but the Q2 figures remain positive due to the high value of planning approvals received in April and May.
Commercial, hotel & leisure, healthcare and education sectors all recorded weak levels of planning approvals, in every case being well below 2021 levels.
The only bright spot in terms of planning approvals was the Industrial sector, which delivered planning approvals worth £1.1billion in June.
Planning applications
Planning applications provide the best outlook for the long term for the Construction Industry and May’s figures reveal a very mixed picture. Overall, planning applications were down by 12% to below average levels for this first time this year.
Residential construction saw just £3.5billion worth planning applications being lodged; the lowest monthly value since June 2020. Hotel & leisure and education also experienced poor months with just £300m worth of planning applications submitted in sector.
The infrastructure sector showed the most optimism with £3.5billion worth of planning applications lodged in May. As has been the pattern in recent months, this level was largely driven by new power generation projects, with a £600m hydro power expansion and a £473m wind farm in Scotland.
Some major mixed commercial developments accounted for planning applications to the value of £800m being submitted in May. This is a 17% increase on April’s figure but is still below the long-term average.
Hotel & leisure, education and healthcare all recorded planning applications valued at £300m in May. This is a good level for healthcare and was largely driven by a new phase of the Great Ormond Street Hospital refurbishment. £300m is low compared with the long-term average for both education and hotel & leisure.
>>Read more about trends in the industry here.
