Is This The Start Of A Summer Housebuilding Slowdown?

Two builders on scaffolding on a house

Barbour ABI’s May Snap Analysis data reveals that April contract awards and planning approvals were well below those seen in March – prompting fears of a housebuilding recession.

Barbour ABI’s Snap Analysis is a monthly look at the construction industry across all sectors with the data analysed at each stage of the pipeline – contract awards, planning approvals and planning applications – to give a picture of the short- and medium-term outlook for the industry across the UK.

 

 “After a stellar performance for contract awards in March, activity was always likely to fall in April due to the Easter holidays and a new financial year, coupled with the high inherent volatility of the index.”

– Tom Hall 

Chief Economist, Barbour ABI

 

Recession?

“The question on everyone’s lips will be is this the start of a fall in sentiment before a full-blown recession in the summer?” adds Hall.

 

Contract Awards

Contract awards in April were at their lowest level since August 2021 and were down 33% on the previous month. However, contract awards have been hitting record highs recently and April was still above the long-term average at £5.8 billion.

The reason for concern is the sectors that performed worst in April were commercial and residential, the sectors responsible for the recent record levels of contract awards.

Residential construction contract awards were down 47% in April versus the previous month to £1.8 billion but this is still just below the long-run average. However, the commercial sector suffered the biggest hit with a drop of 75% of the value of contracts awarded in April v March 2022. At just £300 million in April, this was the lowest level since February 2021.

 

Planning Approvals

The short-medium term outlook for construction is indicated by levels of planning applications receiving approval. April’s picture is a mixed one. While the level of planning approvals is high overall, the picture is dominated by Infrastructure development, especially wind farms – but not commercial, hotel & leisure and education.

Residential planning approvals were valued at £3.7 billion in April. Although a drop of 19% on March, this is still a good level of activity for the sector.

 

Planning Applications

The medium-term picture is illustrated by the level of planning applications. Infrastructure construction continues to be the headline act.

Following a poor Q1, residential planning applications returned to average 2021 levels with £4.8 billion of applications submitted in March.

 

Not a trend?

Barbour’s Hall concludes: “One month does not make a trend, however the sharp falls in commercially sensitive sectors across contract awards and planning approvals, particularly for residential and offices will be cause for concern at the current time. On the flip side you could argue that in the face of high levels of uncertainty, the construction pipeline is continuing, at least currently.”

Picture: Will housebuilding slow down in the summer?

Article written by Cathryn Ellis
23rd May 2022

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