analysis
The private sector is key to leisure construction
prospects, says Allan Wilén economics director at Glenigan.
Positive prospects
THE Olympics have been an important driver for the leisure construction sector over the last year, contributing to a near 50 per cent rise in the value of underlying project starts. However, the Games have not been the only source of growth. The sector has also seen an increase in the number of local authority leisure schemes starting on site, together with an increase in hotel schemes and exhibition and conference centre work. Although the value of underlying project starts is forecast to slip back during 2011, prospects remain positive with the sector poised to benefit from a gradual strengthening in private sector confidence over the next two years. Indeed, private sector confidence is
already returning, albeit hesitantly. Whilst access to finance capital remains a constraint upon activity, the flow of projects in the pre-construction pipeline has improved. Glenigan data reveals that the value of hotel project starting on site has already jumped 70 per cent over the last year, in part due to the impending Games providing a catalyst for investors to press ahead with planned new build and refurbishment projects. The hotel sector is forecast to remain firm over the coming year as the major budget hotel chains continue with their expansion plans.
private sector confidence is already returning
The last year has also seen a number of
important conference centre projects starting on site, including the £85m extension to the Edinburgh International Conference Centre and the £48m phased redevelopment of Harrogate International Centre. Both projects will contribute to sector output over the coming year. Near term, the Olympics will also
The Games have contributed to a near 50 per cent rise in the value of underlying project starts
continue to underpin sector output as work progresses on the main stadia, the £50m media centre and smaller related projects that have started on site over the last year. However, the flow of work will slow over the course of 2011 as projects are completed and the focus switches to the preparation of the temporary venues. In contrast, the flow of local authority
leisure projects is set to slow, reversing the strong growth seen during 2010. Last autumn’s Spending Review mapped out the extent of the government cut backs, with overall public sector capital expenditure being cut by a third over the next four years. Against this background council funding for planned leisure schemes will be scarce, with local authorities increasingly looking for private sector partners to take forward projects and to outsource existing facilities. Nevertheless, despite the anticipated
drop-off in government-funded projects, sector prospects remain positive. The jump in project starts during 2010 will help
underpin sector output over the coming year. Furthermore, the value of detailed planning approvals granted during the first nine months of 2010 has held steady, being three per cent up on a year earlier, with areas such as restaurants, which had previously been hard hit by the economic downturn, recording a sharp rise in approvals. In addition, work is already underway on a number of Commonwealth Games projects, with further schemes set to start on site over the coming year, while the Football Association has recently let the contract for £100m Academy in Burton on Trent.
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