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Despite construction hitting a 7 year high in the final quarter of 2015, the latest figures to be released suggest that the UK house building industry is not out of the woods just yet. The Market/CIPS UK Construction Purchasing Managers’ Index revealed that UK housebuilding was expanding at its slowest pace since June 2013. Below is an examination of the challenges for the UK construction industry in 2016 and beyond.
The 2004 Barker Review into UK housing found that 240,000 new homes were required each year in order to meet demand, and to maintain affordability. In 2015 the house building industry in the UK built 140,000 new homes, meaning that there is a short fall of 100,000 new homes each year in the UK. This shortfall is driving up the cost of both housing and land.
Lack of Land
Despite attempts by the Government to identify and provide more public land for housing developments, the supply has remained inadequate, and there is ongoing controversy about building on green belt land. As the price of land continues to rise, private landowners are reluctant to sell to property developers.
Lack of Skills and Material
After the financial crisis, many skilled construction workers left the industry as demand for new housing fell. As the market has slowly improved, the industry is struggling to fill this skills gap. However, the house building sector is helping to provide a crucial way for young people and lower skilled workers to enter the labour market, by providing 16,000 apprenticeships in skill sets such as plumbing, carpentry and bricklaying. Although it is helping to house the population, while also training workers and reinvigorating the economy, the house building sector is still facing many challenges as a result of the fallout from the recession and the current economic climate.
The resurgent housing market has also led to lack of materials such as bricks. A report by the Royal Institution of Chartered Surveyors found that this could cause a drag on continued recovery of the house building sector. Investments made by private companies, increasing the supply and quality of materials and, in the case of Ardent Hire, equipment, should provide some help.
The EU Referendum
Goldman Sachs has predicted that house builders would be hit if Britain votes to leave the European Union. The lengthy period of trade agreement renegotiations that would follow a UK exit would be likely to cause significant economic uncertainty.
Although it is helping to house the population and reinvigorate the economy, the house building sector is still facing many challenges. With the extension of the Help to Buy scheme, through which the government provides loans of up to 20% of a property’s value, it is likely that demand for new homes will continue to remain high.
The highly developed and complex networks of working relationships and supply chains, which bring together a wide range of skills, specialisms and trades, from large companies to individual sole traders, will have to find new ways to work together in order to meet the demand for housing in the UK.