Growth in private sector construction is failing to keep pace with cuts in Government funded projects, according to the latest Glenigan Index which tracks the flow of new construction projects starting on site. In the three months to August 2010, the Glenigan Index recorded a 6% year on year fall.

According to Allan Wilen, economics director, Glenigan "A much diminished flow of government funding, particularly for education and social housing projects, reduced the overall level of construction starts in the three months to August. In addition the growth in private housing starts has stalled and positive growth from other parts of the private sector has been insufficient to make up for the lack of publicly funded project starts."

In the residential sector, social housing projects starting on site were 30% down on a year ago in the three months to August. "Whilst social housing starts are likely to remain under pressure over the coming months, a return to growth in private housing starts is anticipated at the end of the year as housebuilders capitalise on gradually improving market conditions and last winters poor flow of new work is bettered" stated Wilen.

Non-residential construction project starts were 9% down on a year ago.

Wilen said: "While the major supermarket chains, in particular Tesco, have fuelled increased retail construction growth and hotel, leisure and industrial project starts have also improved, office construction has continued to fall. Furthermore, while community & amenity and health managed marginal increases over the three months to August, education project starts are becoming increasingly scarce following the demise of the Building Schools for the future programme."

Civil engineering project starts managed to buck the trend and show a 22% increase on a year ago.

"This area has been an important source of new work over the past three months. The growth rate was bolstered by a particularly high level of project starts in June for both infrastructure and utility projects. Spending on rail projects has been a key to the growth in the underlying value of project starts over the last three months," concluded Wilen.