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Construction starts fall 24%

18 Jul 11 Underlying value of UK construction project starts was 24% lower for the three months to June compared to the same period in 2010.

Analytsis by construction industry analyst Glenigan shows that starts were firmly down across the board, with the exception of retail.

Hotel construction in London fell 73% year on year. "Last year saw a surge in hotel starts as clients pulled forward projects to ensure completion before the Olympics. The current lull is forecast to be temporary with the budget hotel chains expansion plans underpinning future growth," said Glenigan economics director Allan Wilén.

Industrial and office construction starts were down 35% and 20% respectively as investors remain cautious against the backdrop of the weak economy and high inflation. Civil engineering project starts were 29% down due to a continued decline in infrastructure developments and a volatile utilities sector.

Residential construction was down 29% year on year as a result of private and public sector cuts. Private housing project starts were down 31% year on year, while social housing was down 26%.

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"House builders continue to be reluctant to start new sites and are focussed on completing existing developments as the housing market remains sluggish. However, the government's Firstbuy programme will help to bridge the mortgage gap for first-time buyers and Glenigan forecasts that private house building will stabilise by the end of 2011,” Mr Wilén predicted. “In contrast social housing will decline further as a result of continued public sector cuts.”

Retail was the only sector to buck the trend with a 13% year on year increase as the major supermarket chains press ahead with expansion plans. "The supermarkets continue to get good value for money from the construction industry as it competes fiercely for new work" said Mr Wilén.

News of the 29% fall in housing starts coincides with a report by property website Rightmove that the average asking price for a home dropped 1.6%, or £3,797, to £236,597 in July, ending a run of six months of rises.

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