Public spending ‘uncertainty’ hits project starts

Project starts in the leisure and office sectors have dipped as the construction sector waits for clarity on spending plans.

And uncertainty around public spending on infrastructure and housing has also slowed activity across the UK, according to Glenigan’s latest monthly Construction Index.

In the three months to February, site starts were down by 6 per cent, the analysis shows.

They were also 17 per cent lower on a year-by-year basis – with the housing, engineering and leisure sectors affected in particular.

Glenigan economics director Allan Wilen said the slowdown could reflect “faltering consumer and business confidence combined with the disruption of public sector capital programmes”.

“The current decline in project starts underlines the need for a rapid deployment of the promised funds from April,” he said, referring to increased capital funding allocated by chancellor Rachel Reeves in the Autumn Budget.

The latest data from Glenigan contrasts with last month’s Construction Index. Then, the data intelligence provider said that project starts on private housing increased by a third in the three months to 31 January.

At the time, Wilen said the data showed consumer confidence was returning, indicated by a steep hike in mortgage applications in 2024.

The newly released report said that construction contractors and developers were waiting for certainty to come in the form of the government’s Spring Budget, which is expected on 26 March.

Wilen also pointed to financing issues, especially “unfavourable credit conditions”, which are impacting smaller firms in particular.

The hotel and leisure sector struggled, with starts down by 29 per cent. They also fell by 14 per cent on the same period last year. The education sector also saw a decrease, with starts down by 31 per cent in the latest three-month period and by 25 per cent year on year.

In the office sector, starts were down by a fifth and by 28 per cent compared with last year.

Project starts in the civil engineering and housing sectors also declined, by 4 and 10 per cent respectively. Compared with last year, starts were also down by 30 per cent in engineering and 14 per cent in housing.

Within housing, the social housing sector was most affected, with a drop of 12 per cent and of 24 per cent compared with last year.

The private sector also saw a decrease of 10 per cent and a 14 per cent increase compared with last year.

Glenigan’s analysis follows similar warnings from the Federation of Master Builders (FMB) earlier this week. SME builders, it warned, were hit by a “deteriorating economic climate” in the final months of 2024, pointing to an 8 per cent decrease in activity for its members.