Does a recent construction industry analysis report indicate an upcoming recession?

A recent analysis report from Barbour ABI - well-known and respected for their market leading construction intelligence services - has the construction sector asking: is a recession coming??

Contracts awarded and planning approvals down 33%

Barbour ABI’s analysis clearly shows that contracts awarded and planning approvals achieved in April (2022) were down 33% from the previous month; an undeniably sharp decline.?

However, Barbour ABI does acknowledge that the Easter bank holiday - which fell right in the middle of the month - may have had an impact on the notable decline.?

What’s more, Barbour also reminds us that a downturn of just 1 month doesn’t indicate a trend or significant ongoing fall; enough, at least, to signal an oncoming recession.?

Value of commercial contracts awarded dropped by 75%?

However, when this data is compared to, and observed alongside, data relating to other sectors, similarities can be identified.?

For example:?

• Residential and commercial construction sectors experienced the sharpest decline in April, down 47% from March
• The overall value of contracts awarded in April in the commercial sector specifically was down 75% in April
• Education building construction contracts signed were down 50% in April from the previous month
• Infrastructure contracts awarded decreased by 33% from March

High construction costs

Barbour ABI’s report is especially interesting reading in light of inflation running at 9% as published today (18th May 2022).?

Alongside this - and something we’ve commented on earlier this year - is the issue of high construction costs; the cost of construction materials having risen at the beginning of the year, leading to a lot of projects being canceled or postponed as no longer viable, which would naturally leave fewer projects for contractors to bid on during recent months.?

However, the rise in construction costs is expected to be short-lived, and we should see them reduced later in the year.?

Not every sector is experiencing decline

Although there seems to have been an undoubtedly significant and extensive downturn experienced by so many sectors, it’s incredibly important to recognise that not all sectors suffered during what seems to have been a worrying April.?

High demand for warehouses, for example, led to an impressive 30% increase in contracts awarded to the industrial sector.?

The leisure sector also saw a sizable uplift, specifically from Everton FC’s new ￡500 million stadium.?

A notable increase in planning approvals within the renewable energy sector

What’s particularly interesting, though, is that the level of planning approvals is generally high, thanks to infrastructure development in the renewable energy arena - notably 3 offshore wind farms planned to be constructed off the East coast of England - which made up over 78% of infrastructure projects approved in April.

Although, as stated above, just 1 month of statistics doesn’t indicate a trend, the sizable approval of wind farms during April is a promising indicator that the renewable energy sector, and infrastructure/construction within the renewable energy sector, is thriving; presumably largely due to the UK government’s push to tackle carbon emissions, the recent steep rise in energy prices, and the consequent recognition that renewable energy is the way forward.?

But is a recession coming??

So, answering the original question: is a recession coming? we can only echo Barbour ABI’s words at this time, which serve to remind us that this is a turbulent time for so many industries and businesses across the commercial and domestic sectors; although Barbour’s analysis of data doesn’t yet indicate a trend, it is cause for possible concern, and the probability of an oncoming recession is real.?

What we do know from all of this, though, is that the importance and recognition of renewable energy as a sustainable source is increasing.?