Housebuilding activity increases in line with investment and apprenticeships

Created: 31 Jan 2022

The UK housebuilding sector has responded productively to the supply chain and cost challenges posed by the pandemic with the latest market data indicating accelerating growth in industry-wide house building activity. Heightened investment levels, supply of human resources, and improved availability of construction materials such as timber have enhanced output for the majority of the real estate market.

Commercial buildings and offices in particular demonstrated accelerated activity levels with the IHS Markit UK Construction Managers index rising from 54.6 to 55.5 in November 2021 before dipping down to 54.3 in December due to the Omicron variant of Covid-19. The sub index of surveys regarding supplier delivery receded to its lowest level since April 2021, suggesting the risk of project delays on account of lack of materials reduced. Moreover, availability of construction professionals and workers with the subcontractors rose to its highest level since May.

Key challenges persist, including shortages of key skilled workers, uninterrupted supply and cost of materials, as well as wage inflation. A Home Builders’ Federation survey references 94 per cent of small and medium sized developers also experienced delays in securing planning permissions. The aftermath of pandemic related supply chain blockages and bottlenecks is gradually clearing at ports, as economies begin to open up again.

Given an ageing workforce in the logistics and transportation industry, as well as the construction industry, higher wages are attracting a new generation of workers into training and apprenticeships. The Federation’s report indicates that nearly 60 per cent of housebuilder businesses employed apprentices, up from approximately 33 per cent in 2020. The sector employs around 800,000 people, both directly and indirectly and is a pivotal growth lever for the UK.

The government is introducing a number of policies to smoothen the planning process and support the construction industry in facilitating job growth as well as housing delivery. Britain came closest to its 300,000 new homes a year target last year, with 243,000 delivered. Homes England’s housing programmes, for instance, enabled 13,229 new home starts and 14,289 completions between 1 April and 30 September 2021 – significantly more than the same period a year previous.

“Private equity is increasingly recognising that UK housebuilders have the potential to generate significant returns. The rise of private equity investment in UK housebuilders comes at a time of unusually rapid growth in house prices, with the Office for National Statistics revealing the average cost of a UK home increasing by GBP25k in the 12 months to August 2021.”