It is common knowledge the UK is facing an undersupply of housing. Unfortunately, this is not a sudden phenomenon – the imbalance between property supply and demand in both the rental and sales market is one of the most pressing issues currently facing the country. Successive UK governments have recognised just how serious the problem is becoming and have pledged to resolve it by increasing the number of houses added to the annual housing stock.
We’ve seen plenty of quotas being set – the most recent being Prime Minister Boris Johnson’s commitment to add one million new homes over the next five years. However, the question of whether these targets are feasible is another question entirely.
At the centre of the housing crisis is the construction sector. While the construction of new-build properties will not completely address the imbalance between supply and demand, it is without doubt one of the key pillars of any housing strategy. That’s why the government cannot let the challenges currently facing the construction industry be overshadowed by Brexit in 2020.
The challenges currently facing the construction industry
As with most businesses, the political and economic uncertainty caused by Brexit has made it difficult for construction firms to plan for the future. Not only that, their ability to access the finance needed to fund projects has become significantly more difficult. A survey of construction firms by the NHBC Foundation revealed that access and availability of finance was the biggest concern for 20% of the companies surveyed.
Another concern is a potential skills shortage as a result of the UK leaving the EU. According to the Office for National Statistics, 7% of UK construction labourers are EU nationals – this figure jumps to 28% in London. While it is not yet known what kind of migration system will be put into place to accommodate EU nationals currently working in the UK, there is a risk of labourers leaving the workforce due to ongoing uncertainty about their future working rights.
Finally, the UK’s construction output has been in decline over the last 12 months. June 2019 marked the construction industry’s worst performing month since 2009. However, figures from Markit/CIPS UK Construction Index for January revealed that the rate of output decline is slowing down. This is being partly attributed to a recovering pound and greater political certainty.
Supporting the needs of property developers in 2020
It is difficult to tell at this point in time just how 2020 will play out. January was for the most part a positive month, with many sectors experiencing modest growth as a result of the so-called Brexit bounce. And with Brexit now officially in motion, a greater degree of certainty is returning to the markets, even if there are still plenty of unanswered questions.
Importantly, the housing crisis can no longer be overlooked. 2020 is the year action is needed. That is why the government must actively address the obstacles preventing the UK’s construction industry from reaching its full output potential. After all, there is a clear need for property developers to support substantial infrastructure projects that go beyond just residential and commercial real estate.
The government has promised over £100bn in funding for infrastructure by 2025. This means we are likely to see a significant number of tenders coming to the market over the coming years.
For now, I for one would like to see the government use the Spring Budget in 11th March as an opportunity to address some of the concerns facing construction firms by introducing creative and supportive reforms. There are some fantastic opportunities on the horizon, which is why we must ensure our construction sector as a whole is properly equipped to tackle the housing crisis and take on future infrastructure projects.
Jerald Solis is the business development and acquisitions director at Experience Invest.