Housebuilding activity has fallen for three consecutive months to November, worryingly for the new Labour government.
Published on January 7, the latest S&P Global UK Construction PMI report revealed that overall UK construction output growth has slowed to a six-month low, with housebuilding highlighted as the weakest-performing category.
Housebuilding activity has decreased for three consecutive months - the latest reduction was the fastest decline to be reported since June last year. Subdued demand conditions, elevated borrowing costs and weak consumer confidence have been linked to contributing towards this latest position.
Construction companies reportedly experienced a ‘loss of momentum’ towards the end of last year, which is reflected by the fact total business activity expanded at its slowest pace since June. Meanwhile, new order growth remained moderate for the third month in a row.
From an overall industry activity perspective, December’s PMI reading was 53.3, which was a drop from November’s 55.2 reading, and the lowest reading for six months. However, the latest report does also reference the fact that readings have hovered above the 50.0 ‘no change’ value since March last year, and that the latest reading still demonstrates a ‘solid upturn in overall construction output.’
Speaking of upturns, commercial activity was the fastest-growing category in December (index at 55.0) followed by civil engineering (52.9). However, these latest results do still signify a slowing down in the rate of business activity expansion within both areas.
Josh Ward-Jones, director of Bloom Building Consultancy, said “this is not the housebuilding boom the government wants. With the fundamentals of housebuilding seemingly stacked against them, many residential developers are holding fire and no amount of relaxation in the planning rules will get the new homes Britain needs built.
With residential stuck in reverse, progress across the construction industry as a whole has slowed, and the rate of expansion has slipped to its lowest level for six months. Many housebuilders are proceeding with caution or not at all, and the government’s promise to get 1.5 million more homes built in England over the next five years is going to be very hard to keep.”
One positive was commercial activity was the fastest-growing area of the construction sector in December.
Angela Rayner admits 1.5 million homes is not enough
Deputy Prime Minister Angela Rayner has admitted that even if the country succeeded in constructing 1.5 million homes in this parliament, it would only ‘make a dent’ in the housing crisis.
Speaking to the Housing, Communities and Local Government Committee, she said it would be “foolish” to give a number on how many social homes would be built next year, clarifying that it depends on local plans.
However, she pledged to create the “biggest wave of social and affordable housing for a generation”.
She said “even with the 1.5 million homes target, that is a stretch target. I don’t lose. I hate losing. I’ve always been underestimated all my life and I’m determined personally not to lose this fight either. But even if I and this government achieve this 1.5 million homes target it is a dent in what we need to achieve as a whole country to deliver the houses that we desperately need. We haven’t seen this level of housebuilding since the 1950s in the post-war and it is a similar challenge we face today to get that as well. I think they are achievable targets that we’ve set.”
Some 221,070 additional dwellings were created in 2023/24, down 6% year-on-year and well short of the 300,000 target.
Alison Ogley, planning law partner at Freeths, said “Angela Rayner’s understanding of the scale of the task in meeting housing need represents a marked change from the previous Government’s position, which was characterised by a revolving door of Housing Ministers and Secretaries of State.
The path ahead in achieving the ‘stretch target’ of 1.5 million homes in five years is fraught with obstacles; it may be achievable, but the government will likely have to go much further than current proposals to provide the local planning system with the resources and tools it needs to deliver. Blockers to infrastructure delivery are complex; challenges with aggregates supply, increasing pressures on the construction industry, and ensuring local planning authorities deliver timely improvements (funded by the development sector) are just a few of these.
It remains to be seen whether the government is able to grapple effectively with these issues and find a positive path through, which will be critical to meeting the 1.5 million houses in 5 years.”