The total value of new construction projects in the UK has fallen by 21% over the last year with residential projects down by more than 30%.

According to the November edition of the Glenigan Index, which monitors and tracks the value of all new construction projects across the UK to provide a definitive guide to trends and forecasts for the construction industry, a continued weakening of the Index well into the first half of next year is anticipated.

They said that UK construction 'starts' are expected to remain below pre-credit crunch levels over the next two years.

"Construction in every part of the UK has been affected by the fallout from the credit crisis," said Allan Wilén, Economics Director, Glenigan.

"While the Bank of England's decision to slash the base rate may help rekindle confidence and money market liquidity in due course, we anticipate a further weakening in new project starts over the next nine months, which will continue to be a drag on industry output into 2010."

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Although the decline in new construction starts has been consistent across the country, the East Midlands has fared particularly badly with the value of project starts down 50% compared to a year ago.

Private housing and non residential construction continues to decline but, encouragingly, civil engineering has increased by 8% compared to a year ago, primarily as a result of the Government's commitment to developing renewable energy options.

Reduced access to finance and job insecurity have also caused a sharp reduction in housing demand, and the value of residential projects starting on site is down 31% on a year ago with prospects for any improvement remaining bleak.

House builders have scaled back their commitments and social housing has not delivered a boost to residential construction despite recent Government policy to bring spending forward.

The sector's prospects are not expected to improve until house prices stabilise, which is unlikely to happen for at least four or five months.

However, investor confidence is expected to stabilise during 2009, while new health and education projects in the pipeline should result in a modest improvement in the sector from the third quarter of 2009.

The Glenigan Index is based on Glenigan's extensive database of construction projects, and tracks the monthly flow of construction projects valued from £100,000 up to £100 million starting on site each month.

(BMcC)