Construction Downturn: London

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So far during 2008 the capital has avoided the worst effects of the economic slowdown.

While the underlying value of work starting on site slipped back 4 per cent during the first seven months of the year, this was more than offset by work commencing on a number of high-value schemes such as Olympic stadia, the Stratford City development and the Beckton desalination plant.

As private housing accounts for a relatively modest proportion of construction activity in London, this has provided some shelter from the hiatus in the housing market. In addition, social housing and infrastructure investment have accounted for an above average proportion of work starting on site.

But it has been commercial office projects that have been the mainstay for the industry in the capital.

Accordingly over the coming year London will be hard hit following recent sharp falls in office schemes securing planning approvals. This has contributed to a 22 per cent fall in underlying planning approvals in the capital during the first seven months of this year.

Combined with a growing number of projects being placed on hold, this is expected to prompt a sharp fall in the value of work starting on site during 2009.