Increased growth and investment forecast for UK housebuilding sector

Housebuilders forecast increased growth and investment in the sector despite skills challenges and Brexit 

Despite challenges including the current planning system, a skills shortage and uncertainty following the EU Referendum, housebuilders are forecasting increased growth and investment in the sector.
That’s according to the second annual Lloyds Banking Group Commercial Banking report on the UK housebuilding sector, which analyses the state of the industry today, and the opportunities and challenges it faces in the future.
The report is the first in-depth study of the sector following the decision to leave the European Union in June 2016. Although more than a third of firms (36%) said that the uncertainty following the EU referendum result is the biggest challenge to their business, the industry is relatively optimistic; planning to grow, invest and create jobs.
Confidence to invest
The research found that, in the face of ongoing uncertainty, optimism about the future of the housebuilding industry has picked up slightly from 7.1 last year to 7.2 in 2016, with 10 representing the highest level of expectation.
It seems that this outlook has given the industry the confidence to invest, with average five-year investment plans up 17% year on year.
Housebuilders are also confident about growth, with 42% of respondents saying that their growth forecasts had improved since the EU vote, compared with 27% who said they had declined. They are now predicting an average growth of 28% over the next five years, up from 25% last year.
Wider sector challenges
The remaining challenges that the sector highlighted, after the EU referendum result, include the rising cost of materials (35 per cent) and the current planning system (29 per cent).
While the UK continues to face the housing shortage head-on, more than one-fifth (22 per cent) of housebuilders do not believe the sector has the resources it needs to help the Government achieve its targets for new housing, and 14 per cent are unsure.
Firms also said that the availability of government support (32 per cent) and suitable land (29 per cent) are factors that impact the industry’s ability to meet targets for new housing.
Addressing the skills gap
Nearly a third (30%) of firms said there are not enough skilled workers in the industry, with bricklayers, electricians, plumbers and joiners being the hardest to recruit. This shows a slight improvement from the 2015 survey from 35%.
Recruitment and skills therefore remain a focus, with three of the top priorities for firms over the next five years being recruiting additional staff (52%), and investing in training (49%) and apprenticeships (32%).
A quarter (25%) of firms are still planning to create jobs to support growth, but this is down from 31% last year. And the scale of planned workforce growth has also fallen back to 22%, from an average of 31% of the current workforce over five years in 2015.
Despite the fall in plans to recruit, the sector still looks set to create more than 70,000 jobs over the next five years.
Pete Flockhart, head of Housebuilders, Commercial Banking, Bank of Scotland, said: “Given the challenges that housebuilders face, the sector is painting a relatively optimistic picture, with improved growth and investment forecasts compared with last year’s survey.
“The wider uncertainty, coupled with the rising cost of materials, presents some challenges but the industry is taking steps to tackle these issues head on, and still plans to grow.
“Businesses are confronting the much-mooted skills shortage and it is encouraging to see that almost half of the industry is making staff training a key focus and nearly a third is prioritising apprenticeships.
“Housebuilding is a key sector for the UK, driving economic growth but also delivering much needed homes which are critical to our communities. We are therefore fully committed to the sector, not just through our continued financial support to our clients to support their growth ambitions, but also by providing solutions such as our Housing Growth Partnership. This is a £100 million dedicated joint venture with the Government to invest between £500,000 and £5 million to increase the supply of new homes by supporting small and medium sized housebuilders.”
Karen Campbell, director of policy at industry body Homes for Scotland, said: “Notwithstanding clear challenges surrounding skills and the planning system, the survey findings paint a welcome picture of optimism in the industry with builders keen to grow their businesses and build more much-needed homes.”
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