Will Rachel Reeves’ planning reforms help the construction sector build 1.3 million homes? Our reaction to the Spring Statement.

In the lead up to this year’s Spring Statement, delivered today by Chancellor Rachel Reeves, the government was keen to insist that this would not be a Budget, nor even a mini-Budget: rather this would be a statement on how the government will react to changing (and challenging) global economic conditions, and what the Chancellor can do to maintain the UK’s economic performance, and to stay within her own fiscal rules.

Given recent global events, it is perhaps no surprise that the Office of Budget Responsibility (OBR) has downgraded growth estimates for the UK, from two per cent to just one per cent. The Chancellor had little room to make sweeping changes, especially given the stern stance taken on returning to annual Budgets and Spring Statements.

However, there were some nuggets to dissect, and at Harris we have looked at the Statement through the lens of the construction sector and what it might mean for our clients.

Capital spending is on the up

The biggest headline for the construction sector is that capital spending is set to increase, with the government investing in public sector projects including infrastructure and housing, as well as the expected funds for defence infrastructure.

As Building reported, the government will invest an additional £13 billion in capital infrastructure over the next five years, with a commitment to spending £2 billion on infrastructure each year over the course of this Parliament – above the £100 billion already promised in the Budget last year. 

This certainly appears to be good news for the construction sector, which will be key to delivering on all of these public sector projects, and some construction leaders have already welcomed the specific nod to our industry.

Planning reforms could boost homes targets

There was some good news from the OBR, which has stated that the government’s planning reforms, which are designed to cut red tape and make it easier to free up viable land for building, will significantly boost housebuilding, and GDP.

The Chancellor has indicated that the OBR predicts that planning reforms will permanently increase the level of real GDP by 0.2 per cent by 2029-30, contributing an additional £6.8 billion to the UK economy.

Rachel Reeves said in the Statement that the reforms will, again according to OBR forecasts, ‘lead housebuilding to reach a 40-year high’ and help to build over 1.3 million new homes in the UK within the next five years. That would be a big step towards the government’s target of building 1.5 million homes in England this parliament.

How do you solve a problem like the skills gap?

As construction marketing specialists, we’re always happy to shine a light on the apprentices and young people in our industry. But it is undeniable that the skills gap remains one of the biggest barriers in the construction sector: there simply aren’t enough fully trained people to do the work required.

So we welcome the news that the Chancellor has set aside £600 million to train up to 60,000 more construction workers, and that 10 new technical colleges will be created across the UK to provide the necessary training.

However, with the CITB reporting last year that over 250,000 extra construction workers were needed by 2028 to meet demand (as of May 2024), it’s not hard to do the maths and see that there will still be a significant shortfall. There is also the question of who exactly will be staffing these new colleges and passing on their skills to the next generation: do we have the resources available within the sector to meet these demands?

A social housing rabbit from the hat?

One of the bigger boosts to construction came two days in advance of the Spring Statement, as the Chancellor and Deputy Prime Minister, Angela Rayner, announced a £2 billion injection of grant funding earmarked for the building of 18,000 new social and affordable homes.

This comes shortly after the award of the most recent Warm Homes Fund Wave 3 funding awards, the largest funding allocation so far with £1.29 billion available for upgrading and decarbonising social housing properties between now and September 2028. This will mean the providers will be upgrading – and futureproofing – social housing alongside the building of these proposed new homes.

The grant will be welcome news for social housing providers and contractors working in this sector, but we must point out that 18,000 homes is a drop in the ocean compared to the 1.29 million households on local authority waiting lists for social housing as at 31st March 2023. It is to be hoped, for contractors and those on waiting lists alike, that there is more where that funding came from in the future.

The Chancellor ended the Spring Statement by reminding us that we live in a changing world, so while it’s certain that there is still plenty of uncertainty about the state of the construction sector this year and beyond, we welcome these interventions and hope that they represent a first step towards giving the construction industry – and by extension the whole UK economy – a boost. We will look forward to the next Budget with interest.