Social Housing Construction

Following the post-election negotiations, the UK is now in unfamiliar political territory with a formal coalition between the Conservatives and the Liberal Democrats.

1950 projects worth 1.4bn started on site from May to July, compared to 2450 projects worth 2.5bn in the previous three months. "Private housing had been a source of optimism as returning private sector confidence encouraged developers to invest in new work. The dip in the last three months highlights the fragility of the recovery." commented Glenigan economist James Abraham.

The new Government is committed to implementing the 6 billion of additional cuts this year promised in the Conservatives manifesto. Whilst this may in part be delivered by the axing of cherished Labour programmes such as ID cards, public sector capital expenditure programmes are likely to be regarded as a relatively easy target. "Construction related areas, from the schools building programme to Crossrail, will be vulnerable to both explicit spending cuts and to cuts by stealth as protracted 'policy reviews' push back planned spending into future years" commented Allan Wilen, economics director, Glenigan.

"While the decline in starts is not expected to continue to the end of 2010, the slowdown has diminished overall construction prospects" said Mr Abraham. Commenting on social housing construction activity, Mr Abraham continued "New social housing projects have fallen sharply, with the three months to July over 40% down on a year ago according to Glenigan data. The shrinking pool of new work comes as the increase in government funds during the last financial year dry up. A recovery is not expected for the sector within the next two years."

The Glenigan Civil Engineering Index for the three months to July was 39 per cent up on a year ago, after a weak start to the year. The Index was again boosted by a marked increase in new utility projects, such as water, energy and waste schemes. In addition, the value of underlying infrastructure project starts has increased by third, offsetting a recent drop in work. In particular growth was boosted by two railway projects in the South East of England with a combined worth of 160m.

The value of non-residential construction project starts also fell. Despite a return to growth in retail construction, the Glenigan Non-Residential Index for July is 14% down on a year ago. "Office and industrial project starts remain weak while community & amenity, health and education have suffered from government cuts" commented Mr Abraham.

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