I’ve never had a soft spot for the construction industry. I’ve seen a bit too much of it around our villages. In this blog piece, though, I’m going to look at things from the housebuilders’ point of view. Yes, really.
What triggered this more generous attitude was coming across some honest, factual online reports of the very serious problems the builders are now having. They made me sympathise, grudgingly, with the position they’ve been put in, by the new government's demand for so much more housing. Angela Rayner and her colleagues want to see 300,000 homes built per year over the next five years. Last year the construction industry built 133,000 (National Housebuilding Council). How will it get from here to there? It can only be by using lots more building materials, and by recruiting lots more staff. And that's where the problems lie.
First, there’s the huge increase in building material prices they've had to deal with in the last few years. In 2023, prices fell slightly, only to start creeping up in four sucessive months up to May. The rise in building material costs has reduced profitability for those developers still selling new homes at similar prices to previously, but forced to pay higher costs. Some developers have delayed projects, waiting for prices to come down or looking to find the finance to cover the increased costs.
The price rises in building supplies have had a knock-on effect on UK house prices. It’s more expensive to buy a new home, as many developers are passing on the increased costs to buyers. This reduces affordability and makes it harder for people to get on the property ladder.
The second problem is one of getting and keeping a trained workforce. The number of construction workers in the UK has fallen by 14% to 2.1 million since 2019, according to official data published last month. About 38,000 vacancies were advertised every month in 2023, according to the Construction Industry Training Board. That’s despite the fact that wages were 22 % higher at the end of 2023 than at the start of 2019. The executive director of the Home Builders Federation comments: ‘If we are going to match the next government’s housing targets... we will need to recruit tens of thousands more people across all trades.’ He wasn’t exaggerating. According to one report, some 266,000 extra construction workers will be needed by 2026, the equivalent of 53,200 a year, just to meet the current level of construction output. Another industry source says the construction industry will need another 50,000 workers just to manage a 3% output increase!
Construction industry job vacancies in the South-East are higher than in Britain generally. By 2028, 37,000 extra construction workers will reportedly be needed in London and the South-East to deal with expected output levels. Add to that the fact that the industry has an ageing workforce, with a considerable portion of skilled workers approaching retirement age and insufficient numbers of younger workers stepping in to fill these roles. It lost 10,000 from its workforce in 2022/23. Apprenticeship starts dropped by 6% year on year. Completed construction apprenticeships have fallen by around 11% annually for several years. It’s easy to see why the employers are worried about workforce numbers.
These aren’t the only problems faced by the industry. Interest rates remain comparatively high at 5%, meaning a decline in demand for houses, as people delay a buying decision until mortgage rates come down. In addition and not least, there’s an issue with building safety inspectors. They had to register by April with the Building Safety Regulator to continue working. The deadline was extended, but in July it was announced that some inspectors will have to ‘work under supervision’ after still failing to register for their competence assessment.
Given all this, how realistic is it to expect areas such as Wokingham to build so many extra houses? It’s quite informative to look at what the construction industry has been able to manage in recent years. This graph, using Office for National Statistics figures, shows the number of dwellings completed in Wokingham Borough over the financial years 2013-2014 to 2022-2023, compared with neighbouring local authorities :
The enormous rise in new house completions in Wokingham was mainly due to the SDLs created around Shinfield, Arborfield and Wokingham Town in the years from 2016 on. Even with them, though, the average number of house completions over the ten-year period is only around 900 or so. The new government is saying Wokingham Borough should build 1,308 dwellings a year from now on. Over the same period, West Berkshire, Windsor & Maidenhead and Bracknell have averaged annual new house completions in the low hundreds. The government is now telling them each year they have to target 1,057 dwellings (West Berks), 1,341 (Windsor & Maidenhead), and 767 (Bracknell).
I did the sums. That’s almost 2,400 EXTRA houses that Westminster policy-makers want to see completed in these four LAs every single year. That more than doubles what the builders have typically managed over recent years. It will require a huge increase in the workforce, volume of building supplies, logistics capability etc.
Where all these extra resources will come from, hasn’t been explained. Until that happens, Rayner’s housing boom isn’t going to happen either.
Pat Phillipps
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