Construction industry predicted to have cooler summer as new contracts slow

Survey finds that residential developments account for a third of sector’s work, and London nearly a quarter of UK projects

Britain’s construction industry is expected to cool during the summer following a slowdown in the number of new contracts.

A survey by Barbour ABI found that a rise in contract signings between April and May of 5.3% was not enough to offset a fall over the spring that left the value of contracts down 3.7% on the same time last year.

The survey follows a series of official figures showing a gentle fall in construction activity. The Markit/CIPS construction PMI this month reported that construction output had grown at the slowest pace in seven months in May after edging lower in April, to 60 from 60.8. A figure above 50 indicates a period of expansion.

The survey found that residential housing starts accounted for around a third of the entire sector’s work amid signs of weak activity in the infrastructure and civil engineering industries.

Only two of the past 14 months have seen residential construction take a slice less than 30% of contract wins, while growth in commercial space such as offices, shops and warehouses has fallen.

Michael Dall, lead economist at Barbour ABI, said London was the UK’s hotspot for construction activity in May, accounting for 24% of the UK total as a result of big-ticket projects including Selfridges’ redevelopment of its Oxford Street store and the Hyde residential development in the West End, worth a combined £500m.

He said: “After the poor weather impacting the growth of contracts awarded at the start of the year, it’s positive to see the construction industry bouncing back with a healthy month-on-month increase in activity. It’s also encouraging to see the number of projects increasing, which suggests there is a healthy pipeline of work.

“Despite this, there are clear signs that the growth we’ve become used to over the last six months is starting to slow, such as the second consecutive month where year-on-year values have fallen.

“It is perhaps more concerning that much of the construction industry’s growth is still contained within the residential sector. With both infrastructure and commercial and retail sectors down on 2013 figures, it’s even more important that we start to see an upturn in these other key sectors for a stronger, sustained and more durable economic recovery.”