Featured Sector: Infrastructure

Underlying value of construction projects starting on site. (Excludes individual projects of more than £100 million and framework agreements).

Infrastructure, more than other sectors, relies on major project spending from the government. Therefore, the commitment to fund a series of major projects from the coalition government was a welcome one. However to date there has been very little action on the ground especially involving the larger scale projects. Nevertheless having slipped back during the preceding two years, the value of underlying project starts grew by 7% last year. In addition there have been several major £100 million plus contracts (which are excluded from the index) that have also supported sector output, particularly in London and the South East of England.

Investment has focussed on rail related investment, the reasons for which were part necessity, part economic stimulus and part Olympic preparations. We expect there to continue to be a high value of rail investment, with several major projects slated to start over the next few years. However, we also now anticipate increase investment on the road network, which has been neglected in recent years (at least in comparison to the railways).

The re-launching of the private finance initiative as PF2 promises to reinvigorate the flow of major capital projects, but it will take time for schemes to negotiate the new funding and legislative regime and to progress to start on site. Furthermore a significant proportion of these many schemes will have a construction value in excess of £100m. Whilst Glenigan tracks and reports on these schemes, they will be excluded from the underlying project data.

Accordingly we expect the flow of underlying project starts to come under renewed pressure during 2013, slipping back by 9% before stabilising in 2014.