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Govt going slow on spending

Government departments have been slow to use additional construction funding from the Chancellor with a £700 million capital under spend in the last financial year across health, education, transport and social housing.

The figures compiled by UK construction industry market intelligence firm Glenigan will disappoint contractors struggling to win work.

The Glenigan Index for April recorded a 30 per cent fall in new construction project starts against a year ago, with the decline led by a halving in housing schemes and a sharp fall in non-residential projects.

The public sector continues to disappoint, according to Glenigan. Significant falls in project starts in the health, education and community and amenity sectors have provided no relief from private sector decline.

Last autumn’s Pre-Budget brought forward some £3 billion of capital investment from 2010/11.

But the declines in public sector starts highlight the slow progress by Government departments in utilising the additional funding.

This is reflected in a £700 million capital under spend in the last financial year in the four key areas of health, education, transport and social housing.

While detailed planning approvals for public sector projects have been weak, Glenigan has identified a number of projects at the tender stage which indicate the second half of 2009 will be more positive.

'However, the boost is likely to prove short-lived, with gross government investment set to fall 27 per cent over the next five years - in cash terms,' said Glenigan economics director, Alan Wilen.

'The construction industry should look elsewhere for growth as the UK emerges from recession over the next couple of years,' he said.

Conditions in the housing sectors are especially grim, with the Residential Index during April at less than half the level of a year ago. The slump in the wider housing market continues to depress private housing project starts. The flow of new social housing schemes is also significantly down on a year ago despite recently announced Government initiatives.

The Non-residential Index has also fallen sharply, in April standing 32 per cent down on a year ago. The decline has been led by a slump in private sector work, with the value of underlying project starts in the industrial, office and retail sectors running at less than half that of a year ago as developers have shelved planned schemes due to weak demand and restricted access to finance.

Near term, the flow of project starts will remain extremely weak. Based on projects Glenigan is currently tracking, it forecasts the Glenigan Index will be 18 per cent down during the second quarter of 2009 on a year ago.

'While we expect the Index to improve during the second half of the year, construction activity is expected to remain subdued until 2011,' said Mr Wilen.

About the Glenigan Index

The Glenigan Index is published monthly by Glenigan, the leading provider of UK construction industry market intelligence, and is based on Glenigan’s comprehensive database of construction projects.

The Index monitors and tracks the monthly flow of construction projects valued from £100,000 up to £100 million starting on site each month across the UK, to provide a definitive guide to trends and forecasts for the construction industry.

Glenigan combines comprehensive data gathering and exhaustive research with detailed statistical modelling and expert analysis, to deliver a trusted insight into UK construction trends and activity.

Its customers include construction companies, manufacturers and suppliers of materials used in construction projects, as well as specialist service providers including recruitment agencies, financial institutions, IT and telecoms companies.

For more information go to www.glenigan.com.