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Tue October 27 2020

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Private sector growth offers hope for construction

18 Oct 10 Private sector non-residential construction grew 7% in the three months to September, compared to the same period last year.

Private sector non-residential construction grew 7% in the three months to September, compared to the same period last year, according to new data from Glenigan.

The retail, hotel and leisure, industrial and office sectors all saw increases in the value of construction projects starting on site, based on the Glenigan Index, which tracks the monthly flow of construction projects valued from £100,000.

While retail and hotel construction has been strong for the past six months, industrial and office project starts have returned to growth after a sustained period of decline.

"The increase reflects improved business confidence and lending conditions but it is from an extremely low base," said James Abraham, economist at Glenigan.

Worryingly, private housing project starts fell during the period following a year of sustained growth.

“This recent dip highlights the fragility of the recovery,” said Abraham. “A temporary return to growth is anticipated at the end of the year. However poor household earnings growth, high unemployment, limited mortgage availability and stalling house prices are likely to impact any return to growth."

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Public sector construction in the three months to September was impacted by Government investment cuts, with the value of social housing projects starting on site falling 1% and the health sector experiencing a substantial fall.

Glenigan predicts education projects will fall back in the near term following the demise of the Building Schools for the Future programme.

Civil engineering, earmarked for substantial growth over the next few years, experienced a 13% fall compared to the same three months in 2009, with the underlying value of projects starting on site dropping below £100m.

"The rise in utility work did not offset the lack of infrastructure projects. It is likely that a cut in the Department for Transport's budget in this month's spending review will severely limit prospects for next year," said Abraham.

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