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Project starts set to fall 7pc this year

Business intelligence unit Glenigan has predicted that UK construction projects starts will be 7 per cent lower this year than in 2010.

It expects private housing, industrial, office, retail and civil engineering projects starts to grow. However, social housing, hotel and leisure, education, health, community and amenity project starts are forecast to decline.

Glenigan’s latest index shows the number of construction project starts in the three months to December 2010 fell by 29 per cent on a year before.

Economist James Abraham cited the extreme weather conditions combined with the slowdown in government investment as contributing to one of the lowest monthly total project starts in years.

The East Midlands registered the smallest decline, the three-month comparison boosted by a large pool of new work starting over October and November compared with a year ago. Among the worst affected areas were Yorkshire and the Humber, the North-east and South-east of England.

The figures show that across the UK as a whole, residential projects were down 31 per cent, non-residential down 20 per cent and civil engineering 50 per cent lower than the same period a year ago.

Looking ahead, Glenigan expects construction projects to fall by 7 per cent this year.

Glenigan economics director Allan Wilen said: “The impact of planned government investment cuts is clear, with only rail avoiding the axe and increasing private sector confidence not quite strong enough to counter government cuts.”

Increasing demand from tenants, in addition to rising capital and rental values, will result in office developments recording the strongest growth in 2011 of 41 per cent year on year.

Strengthening UK manufacturing, improved investor confidence, rising property capital values and a fall in available floorspace will boost industrial construction project starts by 29 per cent year on year.

The manufacturing sector was hit particularly hard by the economic recession, with project starts falling 60 per cent over the past three years.

Retail construction is forecast to increase 4 per cent this year following a very strong 2010. Meanwhile, the hotel and leisure sector will suffer a 24 per cent year-on-year decline in new construction projects, primarily because the 2010 boom in activity associated with the 2012 Olympics will peter out.

Glenigan economist James Abraham said: “The fall in government investment since the start of the financial year has already had a negative effect on the value of construction projects starting on site, most strikingly in the health sector.

“Project starts in the education, social housing, community and amenity sectors are all forecast to fall by over 25 per cent year on year, having held up relatively well in the autumn.”


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