Construction values fall 30% after ‘robust’ October

The latest Economic and Construction Market Review from industry analysts Barbour ABI showed contracts agreed in November reached a combined value of £5.5bn – down 30.1% on last year and 7.8% on the “robust” performance observed in October, when they reached almost £6bn.

Residential, commercial and retail and infrastructure sectors all struggled to gain momentum in November, Barbour ABI said.

The number of construction projects in the UK also decreased 8.7% in November, but there were still slightly more projects around than in the same month last year, the firm said.

The residential sector led all other sectors with £2.1bn worth of construction contracts in the month, 79% of which came from private housing investment. However, this too represented an 8% decrease on October and was 5.7% lower than in November 2015. Barbour ABI based its calculations on a three month rolling average.

Lead economist Michael Dall said the industry was “vastly behind” where it was in the same period last year and that an “anxiety over Brexit and future political decisions” were the most likely causes for the drop.

He also warned the industry was relying too heavily on the residential sector to generate a large proportion of contract value. “Other major sectors such as infrastructure and commercial & retail will need to see an increase in construction contracts and value if construction is to have a positive turnaround in 2017,” he said.

He added: “The number of construction projects in November were at the lowest point since December 2015 but the total contract value remained stable in comparison to the rest of 2016, indicating that larger projects are still being commissioned, making up for the lack of overall contracts.”

The majority of the contracts awarded in November by value were in the North East and London, accounting for 15% each of the UK total. Figures were bolstered by a construction contract for the Tees Renewable Energy plant in Cleveland, which had a value of £650m. In London, the largest contract awarded was residential scheme Abbey Retail Park in Barking, which is set to deliver 597 flats at a value of £90m.

Meanwhile, the government has set aside £7.2bn of investment to aid house building. The measures, announced in the November Autumn Statement, include a housing infrastructure fund of £2.3bn to potentially deliver up to 100,000 homes alongside £1.4bn for affordable house builds by 2020/21.

Chancellor Philip Hammond also announced £2bn of funding to pilot accelerated construction to speed up building on public sector land while a further £1.8bn of extra spending by housing associations was found from other sources.