Commercial construction sectors lead strong finish to 2013

• Glenigan Index for December 2013 up 15% year on year
• Second consecutive quarter of growth in non-residential construction starts for the first time since 2010
• Retail starts double during the final quarter of 2012
• 
Civil engineering starts 41% higher than 2012
• Education project starts up by 35%

Strong growth in the retail, office and industrial sectors helped to drive construction activity during the three months to December, according to new figures released this month (January) by industry analyst Glenigan.

The Glenigan Index, which covers the value of projects starting on site from October to December 2013, is up 15% compared with the same period in 2012, as commercial construction activity continues to accelerate.

The value of non-residential project starts has risen by 21%, with impressive gains in commercially funded and education projects. This marks a second consecutive quarter of growth in non-residential construction starts – for the first time since the first half of 2010.

Retail starts during the three months to December were double the level during the final quarter of 2012, demonstrating the impact of improving consumer confidence during 2013.

Education project starts also saw strong growth during 2013 and in the final quarter were 35% higher than in the same period of 2012, with starts for the year as a whole up by 19%. However, this followed a severe slump during 2012 and starts are still 14% below their 2011 value.

The monthly Glenigan Index is based on extensive research of every construction project starting in the UK over the previous three-months and provides an indicator of developing activity in the industry.

Commenting on the figures, Allan Wilén, Economics Director at Glenigan, said: "Our expectations for construction activity are positive, in line with the brightening economic outlook. However, recent consumer data have underlined the importance of business investment to sustaining a recovery that has been based so far on consumer spending."

Civil engineering was one of the fastest growing sectors in 2013 in terms of underlying project starts, with the sector enjoying double digit growth since August. Starts were 41% higher during the final quarter of 2013 than a year earlier due to strong growth in the value of both infrastructure and utilities projects over the period. This is expected to remain buoyant during 2014 with further growth in renewable energy projects following December's announcement of renewable energy 'strike' prices.

Office construction activity has also continued to strengthen, up by 20% on a year earlier, while industrial construction has risen by 15%.

Allan said: "Business sentiment remains high and firm occupier and investment demand for new industrial and logistics, office and prime retail space will drive further rises in new starts during 2014."

In contrast, the health & community and amenity sectors, squeezed by scarce Government funding, continued on a long term trend of decline during the final quarter of 2013. Health project starts were 9% down on a year ago, while community & amenity starts fell 18%.

While the value of social housing project starts was 23% higher year on year, private housing starts fell against a strong performance in 2012. Developers are building out existing sites at an increased rate but recent figures suggest the level at which new projects are starting has not increased dramatically.

Glenigan research during the final quarter of 2013 showed a broader spread in growth across the UK, albeit from a low base in some areas. Indeed, the value of project starts was higher than a year ago in every part of the UK except the East of England.

Project starts in Northern Ireland increased throughout 2013 and during the final quarter were more than double the level of a year ago.

Recent months have marked a turnaround in Welsh project starts, with the value of starts during the last three months 29% above a year ago. Glenigan forecasts continued growth in Wales in 2014.

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The Glenigan index of projects starts provides a leading indicator of construction activity in the UK. It is based on data collected about every construction project started on site in the previous three-month period. The index covers civil engineering, office and commercial projects over £250,000 and more than 10 units for residential property. It excludes any project over £100million.

Glenigan is a leading provider of construction data, contract leads and market analysis. Combining comprehensive data gathering and exhaustive research with detailed statistical modelling and expert analysis, it delivers a trusted insight into UK construction trends and activity. Glenigan customers include government agencies, construction companies and suppliers of materials and services to the industry.