The construction industry is seeing supply chain issues beginning to bite, with a fall in the number of projects started.
Market analysts Glenigan’s review focuses on the three months to the end of March 2022 (Q1), covering all projects with a total value of £100m or less (unless otherwise indicated), with all figures seasonally adjusted.
The central finding of the latest review is the continuing decline of underlying project starts (under £100mi), with figures consistently falling throughout Q1, and a modest dip in main contract awards and detailed planning approval levels.
- Project starts fall 24% in Q1 2022, compared to previous year
- Detailed planning approvals fall 1% during first quarter
- 9% decline in main contract awards in Q1 2022
- Office project starts experience greatest growth in Q1 2022, increasing 28%, standing 1% higher than a year ago
- The north east was the stand-out region for project starts, with the value increasing 22% against Q4 2021, up 4% compared to Q1 2021
On first inspection the picture looks positive, with the value of work commencing on-site in Q1 2022 seeing a seasonal uptick in project starts. Overall, project starts averaged £6,597m per month during the first quarter of 2022, representing a 23% increase, against Q4 2021.
However, this increase cannot distract from the fact that project start levels remain substantially lower than a year ago, this figure being down 24% compared to Q1 2021.
Drilling further into the numbers, the value of underlying work starting on-site averaged £5,337million per month, falling 7% against the preceding three months and by 22% compared to 2021. Major projects fared even worse, dropping 8% compared to Q4 2021, standing 30% lower than a year ago.
Dishearteningly, where a revival in main contract awards and planning approvals had been registered throughout the first two months of 2022, March figures highlight momentum is slowing. Once again global inflationary pressures around building products, energy and fuel are contributing factors.
The total value of main contract awards fell by 9% in Q1 2022, compared to the preceding three months, standing 16% lower than a year ago. Underlying contract awards witnessed a modest decline, down 7% against Q4 2021, and 2% compared to Q1 2021. Despite being only 5% behind the preceding three months, major contract awards plummeted (-43%) compared to the same period last year.
Less concerning, the value of detailed planning approvals only fell 1% against the previous quarter, but were still 10% lower than a year ago. A silver lining in a gloomy set of results, major project approvals experienced growth in Q1 2022, up 6% against Q4 2022 and 2% higher than Q1 2021. However, underlying figures were less positive, down 5% on the preceding three months and 14% lower than a year ago, casting a shadow on this bright spot.
Despite these disappointing results, there remains a strong pipeline of planning approvals and main contract awards, giving a generally positive outlook for the rest of the year. Of course, this will be
The north east was the stand-out region during Q1 2022, experiencing the strongest period for project starts, with the value increasing 22% against Q4 2021, as well as 4% compared to Q1 2021. Northern Ireland and Wales were the only other areas to experience growth on both counts.
A mixed set of results were observed elsewhere. Whilst project starts in the east of England strengthened (+21%) compared to the preceding three months, levels remained 17% lower than a year ago. It was a similar story in Scotland, which experiences 14% growth in Q1 2022, but dropped 27% compared with the same period in 2021.
The south west performed particularly poorly, with the value of project starts falling 39% against the preceding quarter and 51% against the previous year.
Glenigan’s economic director, Allan Wilen, said: ‘the shockwaves of geopolitical ructions in Eastern Europe continue to affect the UK construction industry, but maintaining a sanguine attitude and approach is crucial. Construction is by no means the only victim of this appalling conflict, and a little wider perspective will go a long way. Whilst the across-the-board performance is not in the position the sector would universally like it to be, a modest dip in awards and consents indicates the appetite to build is there, and we can expect a surge in activity when supply chain pressures ease.’