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Data shows spike in projects on hold

The number of construction projects put on hold has almost doubled in the past three months, Construction News can reveal.

Research provided by construction analyst Glenigan showed that the number of projects on hold increased from 212 in March to 419 last month, of which more than a third came in the private sector housing market.

Analysts told CN that low confidence in the economy and lack of availability of finance were primary reasons for the increase in projects on hold, while the regional disparity between London/South-east and areas such as Wales, Northern Ireland and the East Midlands continued to grow.

Glenigan economics director Allan Wilén said: “The figures suggest an anaemic recovery - while you would expect some weakness in the public sector, it’s a concern to see a large increase when we are relying on the private sector to lead the recovery. We’ll be watching these figures closely over the coming months.”

A report this week from the British Bankers Association revealed that repayments outstripped new borrowing in June and lending fell by £614 million in the construction sector.

According to the Glenigan data, private housing projects on hold have almost tripled since March from 51 to 149, the largest number of on-hold projects in the sector since March 2010.

The total value of projects on hold excluding schemes of £100m or more was £1.17bn in June, compared to £745m in March 2011.

Other sectors to have seen big increases in delayed projects since March include hotel and leisure and health while the industrial and office sectors also reflect a large increase in on-hold projects in the same period.

The Home Builders Federation and Federation of Master Builders said conditions were being exacerbated in housing by the lack of mortgage availability to buyers and particularly to first time buyers.

However, HBF director of external affairs John Slaughter said this month’s trading statements from major housebuilders showed there are still sites being opened up by the likes of Persimmon, Bovis Homes and Barratt Homes.

FMB director of external affairs Brian Berry said: “A lot of our members are holding back and waiting for the market to pick up but there are others going out of business and housebuilding is currently dead on its feet.

These figures are consistent with our surveys which show that there is not much going on and that there is a lack of public confidence out there.

“A lot of our members have stopped housebuilding and gone into repairs and maintenance to try to win work. The National Planning Policy Framework will help make the system more flexible but without movement on mortgages we won’t see similar movement for the supply chains.”

The total number of projects on hold for June was 419, the largest figure for more than a year. Glenigan’s regional analysis showed Wales, Northern Ireland and the East Midlands were seeing the greatest growth in stalled projects.

Sectors including utilities and infrastructure have shown improvement according to Glenigan, while retail and social housing figures showed very slight increases in delayed starts since March 2011.

Civil Engineering Contractors Association director of external affairs Alasdair Reisner said: “Early feedback from our current workload trends survey indicates that conditions remain grim.

“Members have also confirmed that the general reduction in workload is being exacerbated by clients either delaying or cancelling projects after they have been tendered. This has a severe impact on companies that have invested to win work, only to see it torn from their grasp.”

Ground engineering firm Bachy Soletanche has been receiving twice as many enquiries as this time two years ago, but many deals are proving slow to get to tender stage, said business development manager Paul Hodgson.

Analysts were also quick to point to Tuesday’s Office for National Statistics figures, which showed a disappointing 0.5 per cent increase in construction output for 2011 Q2 after successive negative quarters.

 

Readers' comments (2)

  • Mark Oliver H+H UK Ltd

    Both HBF and FMB point to the problem of mortgage availability. I have said it before, but is it not time for the Government to seriously consider providing mortgage guarantee insurance, as in Canada?

    Notwithstanding the impact that the construction sector has on GDP, a shortage of homes is a drag on economic growth as employers with job vacancies cannot fill them because would be employees cannot afford to move to where the jobs are.

    House building rates will only increase if there is buyer demand which is currently curtailed by the need for a deposit of 25% or more. The Government could provide mortage guarantee insurance to fund this deposit gap so that more buyers can afford to buy which will drive builders to build more to fulfill the demand.

    The cost and risk of the Government providing mortgage insurance is low since, as it effectively controls house prices via a monopoly supply of permissioned land, it can hedge its exposure.

    Furthermore, many economists would argue that the collapse in housebuilding over the past three years has already sealed our fate for rapid house price inflation in the next decade, meaning that the likelihood of mortgage guarantee insurance needing to payout is very low. Seems simple to me....

    @markoliver_

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  • Jack Sidders

    Hi Mark,

    I think you might be interested in this story.

    http://www.cnplus.co.uk/sectors/housing/local-authority-mortgage-scheme-to-be-extended-to-new-build/8617199.article

    Its early days but the scheme looks like it might have real potential. CLG is aware of the calls for indemnity insurance and it has been a major topic at both first time buyer sumits hosted by Grant Shapps. But I think this bottom up local authority approach appeals to them. Historically local authorities were one of the principal sources of mortgage finance so it will be interesting to see how far this can grow. And as an update to the story Furness Building Society and Saffron Building Society have since joined the scheme as lenders.

    Thanks

    Jack

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