Small housing scheme starts plummet as inflation fears resurface

The overall value of small housing starts has plummeted over the past three months and is now less than half what it was this time last year.

A new study by data provider Glenigan found residential starts of projects valued at £100m or less were 39% lower in March than in January, and 51% lower than 12 months ago.

It comes as worries about the economy resurface despite chancellor Jeremy Hunt confirmation last week that the UK had narrowly avoided a recession in 2022, and assurances that inflation has peaked.

Fears of another wave of construction product price inflation have been stoked by a surprise jump in oil prices announced by Opec+, the group of oil exporting countries that includes Russia and Saudi Arabia.

Glenigan’s monthly report found the value of project starts accelerating on a downhill trajectory in the first quarter of 2023.

Social housing was the worst performing residential sector, falling by 41% since January to 52% of the value seen 12 months ago.

Glenigan economic director Allan Willen said the “disappointing but unsurprising” figures reflected the UK’s stagnant economic situation.

“Despite the Chancellor’s confirmation that we are not entering a recession in last month’s Budget, the UK economic outlook remains weak,” he said.

“Investor and consumer confidence is at a low ebb which has, inevitably, stalled private sector activity.”

A wider pattern across all construction sectors has been replicated across the UK, with Yorkshire and the Humber seeing the steepest fall, with starts in the region down by 57% in the first quarter and 65% lower than last year.

Scotland, the North East and the South East also saw sharp drops in project start values in the past three months, while London’s figures saw a slightly shorter drop of 28%.

The study comes after official planning statistics showed both major and minor planning permissions for the calendar year of 2022 were the lowest for a decade.

The figures showed the proportion of major decisions being approved slipping below 80% for the first time in almost eight years, with just 79% of major applications, those of more than 10 homes, permitted.