The CPA/Barbour ABI Construction Index was 123 in May, 2% lower than April but still 5% higher than a year ago, indicating that activity is still on a general upward trend

Noble Francis

As the Index measures contract awards, it is a forward looking indicator of construction output so we should be expecting output activity on the ground to increase in 2014 and 2015. The highest growth areas, unsurprisingly, were in private housing and industrial factories. However, the most notable recent increase has been the rise in contracts awarded in the public sector. After enduring a sharp period of austerity across public spending, capital investment is rising pre-election and this is now feeding through into contracts for priority schools and hospitals projects across the country. However, as output remained broadly flat in the first half of the year, it is likely to be well into the second half of the year before we see these contract awards feed through into significant new schools and hospitals work.

 

Commercial offices sector index

Steady signs of improvement

The offices sector suffered badly following the financial crisis six years ago and activity is now almost 50% lower than it was pre-recession. However, the sector is recovering and grew 11% last year. The primary driver of this growth was work from the technology, media and telecoms sectors in central London, which accounts for around 40% of the UK offices construction. This year, central London office construction is set to reach its highest level since 2008 and there are also signs that 2014 will see a recovery in cities outside of the M25. Take-up of current office space began to rise in the second half of 2013 in Birmingham, Manchester and Leeds. In 2014, demand for new high-profile office space is rising and has seen projects such as the 19-storey Spinningfields tower in Manchester approved. The CPA/Barbour ABI index for commercial offices in May was 9% higher than in April and 61% higher than a year earlier. The work from this sharp rise in contracts will be spread over a few years but, even still, we forecast double-digit growth for the sector in 2014. And for the first time in over six years, it won鈥檛 just be work in London.

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Noble Francis is economics director at the Construction Products Association

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