UK commercial and retail construction enjoying a 'renaissance'

Commerical construction in the UK is continuing at pace despite macroeconomic headwinds, according to a new industry report. 

In a note to clients, analysts at Barbour ABI said the value of new contracts awarded reached £5.6bn in September. While the figure constitutes a drop of 6.1% compared to a robust August, the month was the second-best performing month of 2018 so far, highlighted by contracts worth over £800m for commercial and retail construction. 

The largest project in September was the £187.5m 10 Bank Street mixed-use development in London (see figure below), almost double the value of the second-largest project on the month. 

(Source: Barbour ABI)

With three of the four largest projects in September based in London, this greatly helped the capital account for the largest share of contracts awarded on the month, with a total of 18.2%, followed by the South East with a 15.3% share and then the North West with 13.1%.

Across the construction sector in September, commercial and retail projects reached £814m, the best month for the segment since July 2016. 

Around 75% of these projects were office-led, such as the £60m Lidl Headquarters development in Chessington. Infrastructure and residential, the two largest sectors within construction, both saw decreases last month, of 11.7% and 5.9% respectively, compared to the figures from August.

Michael Dall, Lead Economist at Barbour ABI, said the last three months have seen a renaissance for commercial and retail construction, with various large projects commissioned and a growing flow of confidence back into the sub-sector. 

“However industrial was the only other sub-sector to see any sort of growth in September, as bigger sectors such as infrastructure and residential are struggling to break the monthly £2bn contract value barrier consistently, an achievement that was found more regularly in 2017.”