Despite Government commitments, UK construction market slows

Planning delays and fears over Brexit blamed for a slowdown in UK housebuilding, as market rises at slowest rate for three years.

Despite the Government promising to deliver 200,000 new homes by 2020 a new survey shows that growth in the private housing sector slowed considerably in the first quarter of 2016.

The UK Construction Market Survey just published by the Royal Institute of Chartered Surveyors (RICS) reveals that only 36% of those working in the construction sector reported a rise in growth rather than a fall over the first quarter of 2016. This figure was closer to 50% in the first quarter of 2015.

Simon Rubinsohn, chief economist at RICS, said:

“Our survey tells us that planning delays are one of the biggest barriers to growth in the construction sector. We have recommended that councils work together to create a team of emergency planners who can parachute into boroughs that are experiencing significant delays, therefore reducing a major growth barrier.

“That said, we cannot discount the climate of uncertainty caused by the forthcoming EU referendum. We know that a range of sectors have been affected by these issues as investors look to delay any decisions until a final outcome has been determined, and construction is no exception.”

Confidence in the outlook for the sector also fell. This time last year 79% more construction professionals expected to see workloads rise over the following 12 months than fall, whereas this year the only 55% more number of respondents expected to see workloads rise.

This is in spite of Chancellor George Osborne’s pledge in the Autumn Statement last year to build 200,000 starter homes with 20% discounts for under-40s, 135,000 shared ownership homes, 10,000 rent-to-buy homes and 8,000 specialist properties for the elderly and disabled.

Rubinsohn said:

“One might well ask why growth in private housing workloads is softening at a time when policy is firmly focussed on the creation of new starter homes. We have long held the view that starter homes cannot be the only solution. There is an issue around the availability of land on which new houses can be built, and we would like to see more being done to free up private brownfield sites,”

Charles Holland, head of residential development and investment at Marsh & Parsons, said:

“Within London, despite remaining well above the long-term average, this quarter has seen the construction of new homes fall by around 40%. According to the GLA, the capital needs to deliver 42,000 homes over the next 10 years to keep pace with demand in the market – and at this pace of construction growth, we will struggle to meet this target.

“There’s been much talk about loosening planning permission and freeing up government land as a way of taking residential construction in the capital up to the next level. Both are valid points but addressing the current skills shortage in the construction industry is the real key to unlocking a housebuilding boom.”