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This week we decided to interview our Chief Economist, Tom Hall on the new and improved Economic and Construction Market Review renamed, Snap Analysis. Find out what he had to say here
Each month, the Barbour ABI economics team produces a report analysing construction contract awards comparing historical activity levels by region and sector. This has formed our Economic and Construction Market Review for almost ten years.
Recent surveys carried out by our market research brand; AMA Research has shown that our colleagues in the construction industry are looking for industry commentary and insight in an easily digestible, visual and informative way. So, we listened and have designed ‘Snap Analysis’: a brand new format to our monthly report that includes more graphs, charts and visual data displays. We’ve also added in new sections with additional analysis of projects reaching planning approval and application stage for readers who are interested in the earlier planning stages. And best of all, it’s completely free of charge.
For many years we have produced original content for the construction industry free-of-charge. We firmly believe that we are stronger together as an industry, and we want to use our position as the market leaders in construction research intelligence to give every business in our industry the greatest chance to thrive.
We have retained all the information we have always provided in our popular Economic and Construction Market Review, but now we have updated the format to display the data in lots of new exciting features. these include:
• Our newly developed Relative Strength Index (RSI) which quickly and easily explains the strength of sector performance by month, quarter and year using a 0-100 scale
• Radial graphs to show the levels of activity (using our RSI) in all sectors by region
• Future expectation and risk analysis by sector
• And much more
Our previous report analysed projects that have reached contract award stage, the ‘Snap Analysis’ includes contract award projects but now also includes planning approved and planning application stages. We spoke to our customers and realised that it was important to businesses in our industry to understand the levels of activity in the pipeline at planning stages. So, we’ve added in the same level of regional and sector analysis to these stages in the new report – a fantastic addition
Rounding up January’s data, we saw an overall fall of 12% in contract awards month-on month, a total value of £4.3 billion.
Planning approvals in January continue on a lower trajectory (compared to pre-covid-19 figures) with a total value of £6.7 billion. However, we have seen high hotel and leisure activity and strong industrial activity which masks weaknesses in the residential and education sectors. Some highlights:
Residential contract awards maintain recent activity, which shows steady levels but lower than average. Higher activity continues in the North with the North West seeing £900 million of contract awards over the last quarter. The South West is also strong with around £500 million of contract awards in the same period. However, we are seeing lower levels of new contract awards in Wales, Scotland and the North East.
Residential projects at planning approval stage are off to a weak start in 2021 falling by 39% in January. Regionally, the level of activity is higher in the North and Midlands.
Infrastructure fell by 57% in January with just £500 million new contract awards. This is after investment rose by 40% in 2020. We see very strong infrastructure spending in Wales thanks to December’s A465 Heads of the Valley dual carriageway project worth £500 million.
Infrastructure holds steady in January with £800 million worth of projects reaching planning approval stages. The activity is highest in the North East, South East and South West.
With the thin Brexit creating trade barriers, warehouse space is at a premium. This is reflected in the contract awards, with £600 million of industrial contract awards in January.
Two projects in the top four are warehouses projects – including the £125 million Next Warehouse in South Emsall Yorkshire, and the £100 million Uniserve Distribution Centre in Suffolk.
However, the weakness in private investment is apparent with the rest of the industrial sector at low levels of new contract awards.
Industrial was strongest over November to January in the North East, East of England and Yorkshire thanks to major warehouse projects. Where there’s a lack of warehouses, contract awards are weak – most specifically in the East and West Midlands, Wales, and Scotland.
Industrial sector remains consistently strong in January with £700 million new project approvals after strong activity in 2020.
Commercial activity returns above 50 on the RSI with £700 million of new contracts, led by continuing strong office awards.
The £200 million 1-2 Broadgate Redevelopment in London, awarded to Sir Robert McAlpine, was the single largest project in January and heavily supported the sector.
The Hotel and Leisure sector remains the weakest sector, apart from in planning approvals which has seen exceptional activity in January with £1.8 billion approvals and a RSI of 98.
Major projects approved over the last quarter include the £1.3 billion Olympia Redevelopment in London, £250 million Gateshead Quays Redevelopment in North East, £350 million Manchester Arena in North West.
Healthcare remains robust with the Covid-19 pandemic ongoing. Education is weak in most areas.