Do headline figures ever tell the whole story?
We wrote last week that the most recent dataset from the ONS covering construction was met with more alarm than it should have been, given historical context and some inconsistencies within the data.
In that case, it pointed to a 7.8 per cent fall in new orders in Q2, compared with Q1, which in fairness reinforces what we already know: certain markets are experiencing a slowdown in growth following some economic and political uncertainty.
But, as we said before, it’s not the time to panic.
So this week’s Glenigan Index, which points to a 10 per cent drop in the value of works starting on site in the three months to August this year, compared with last year, should be met with a similar reaction.
The headline figures do support what the ONS data suggests: there has been a slowdown in projects starting on site in the last six months, with starts dropping by 7 per cent compared with March to May 2017.
Glenigan economics director Allan Wilén chalked the slowdown down to a drop in public sector projects in the run-up to this year’s snap election, with purdah putting the buffers on investment decisions.
He adds that this has contributed to a drop in the health sector in particular, “with starts down by over a third on a year ago and against the preceding three months”.
But like the ONS data, the headline figures belie some major positives – particularly in terms of regional markets – while the historical context of the data, and what it includes, shows that a 7 per cent fall in starts isn’t as alarming as it first sounds.
It’s worth noting that the Index doesn’t include projects worth more than £100m – and there are a fair few of those across the country that aren’t included, particularly with almost-record cost inflation forcing up project costs in some cases.
And looking back to the start of the year, there are some sectors that have fallen, albeit from unusually higher points earlier in the year.
For example, a drop in private housing starts is in the context of “a strong rise in project starts earlier in the year,” says Mr Wilén, while other sectors including industrial have bounced back by 11 per cent, which Mr Wilen adds reflects a change from ”a period [last year] when many industrial projects were being reviewed during the immediate aftermath of the Brexit vote”.
Perhaps most encouragingly, the regional data points to a number of booming markets - particularly in the North and Scotland.
Scotland saw a 29 per cent increase in the value of starts year-on-year, while the North West, and Yorkshire and the Humber reported rises of 26 per cent and 25 per cent respectively.
And growth wasn’t just restricted to the North, with project starts also rising by 24 per cent year-on-year in the East of England.
So like the ONS data, there are many positives to be found. The industry should still be cautious - particularly given the ONS dataset combined with Glenigan’s data and statistics from Markit/CIPS does indeed confirm a slowdown in some respects - but it’s clear there are still many areas that present growth opportunities.