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Rising Interest Rates Predicted to Cause Further Headaches For Construction

Glenigan has released the October 2022 edition of its Construction Index. The Index focuses on the three months to the end of September 2022, covering all underlying construction projects with a total value of £100m or less (unless otherwise indicated), with all figures seasonally adjusted.

The report provides a detailed analysis of year-on-year construction data, giving the sector an insight into sector performance over the last 12 months.

Although the October Index indicates a welcome stabilising of project-start levels, sluggish activity persists, with the value of underlying work commencing on-site falling 27% during the three months to September, to stand 23% lower than a year ago. However, despite overall stagnation, civil engineering project-starts proved a bright spot for the construction industry, rising 1% against the preceding quarter as well as 11% against the same period last year.

Calm before the storm
UK Construction has been buffeted by a series of disruptive events over the past six months, and the headwinds are predicted to get even stronger in Q4 2022 and Q1 2023.

The Russia-Ukraine war and resulting materials, energy, and fuel price inflation, as well as the introduction of new building regulations and a new Government, have certainly impacted confidence. However, the market is showing signs of stabilising with the September Index figures slightly up on August’s. This implies the industry is cautiously getting back to its feet.

Glenigan adds that the recent collapse in the value of sterling, and higher than anticipated interest rates, are predicted to further compound rising costs of imported materials and commodities.

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