The number of construction projects starting on site was 23 per cent lower in the three months to February 2009 than the same period a year previously, the latest Glenigan Index has shown.
Residential projects were hit the hardest, down 40 per cent on last year and continuing to be hampered by limited mortgage availability and falling house prices. The office, industrial and retail sectors also took a battering from the economic conditions.
Business intelligence firm Glenigan forecasted that the industry would be 30 per cent smaller in the first half of 2009 than it was in the same period last year.
This bleak outlook comes despite a marked growth in civil engineering projects since the beginning of the year. The outlook across the industry is expected to improve in the latter half of this year, but construction activity is likely to be subdued until 2011.
Glenigan economics director Allan Wilen said: “The March Glenigan Index is published in the wake of official statistics showing a two per cent fall in industry output in 2008. It was weakened by a sharp fall in housing, industrial and commercial work.
“The short-term outlook for construction remains bleak. The slide in new project starts points to a further marked decline in construction output in 2009.”
Several road and energy projects supported a 39 per cent rise in civil engineering projects compared to the same period a year ago. The outlook for the civils sector is expected to remain positive in 2009 as a result of new projects in the renewable energy sector, and spending on rail and road infrastructure.
New project starts are expected to continue in the public sector, hotel and leisure industries. But the office, industrial and retail sectors are predicted to suffer from rising unemployment and cutbacks in consumer spending.
Although all parts of the UK have suffered a collapse in construction projects, the Midlands, East of England and London have been the worst hit with only Northern Ireland showing resilience as a result of a PPP education project.
The Glenigan Index tracks the monthly flow of construction projects valued from £100,000 to £100 million starting on site each month across the UK.