"It certainly seems as though Labour’s first budget since 2010 has derailed the positive momentum building across the construction sector, with output levels falling in the months since"
- Iain Halls - Ceres Property
In Wednesday’s Spring Statement, the Government announced that it was launching a £625m construction skills package to train 60,000 more skilled workers, in order to help deliver an additional £2bn in social and affordable housing
The latest industry analysis by planning and development consultancy, Ceres Property, has revealed that this investment is not before time, as whilst there was a promising initial increase in construction output levels related to new housing following Labour’s initial election win, the wheels have since come off following a bearish Autumn Budget - the party’s first since 2010 - with a decline seen in the months to have followed.
Ceres Property analysed current construction output data from the ONS (January 2025 - latest available), looking at how the level of construction output for new housing across Great Britain has changed since Labour came into power.
The data shows that, on the whole, 2024 saw a decline in total construction output for new homes, falling by -5.7% versus 2023, to a total of £43.5bn. The largest decline was seen with respect to public new housing construction output, down -7.1%, although the private sector also saw a notable decline of -5.5%.
The analysis by Ceres Property shows that a changing of the guard at No.10 brought about an initial boost to construction sector confidence, as output levels rose in the months that followed.
Between January and June of last year, just prior to the election, construction output for all housing averaged £3.56bn per month, with this figure climbing to £3.74bn from when Labour took office in July until October’s Autumn Budget.
Whilst construction output for public new housing climbed by 1.2%, it was private new housing that saw the biggest boost, with average monthly construction output increasing by 5.6%.
However, following Labour’s first budget since 2010, this positivity has faded, with average monthly construction output seen since the Autumn Budget (Nov 2024 to Jan 2025) falling by -7.5%.
It was public new housing that saw the sharpest reduction, with average monthly output falling by -9.9% versus a drop of -7.1% for private new housing.
“Our new Labour Government was quick to put its stake in the ground with respect to new housing delivery, setting what many saw as an overly ambitious target of 1.5m new homes by 2030," comments Iain Halls, Partner at Ceres Property, "Despite widespread scepticism over the ability to meet such targets, it’s clear that the fresh slate of a new government had a positive impact on the construction sector, with a notable uplift in construction output for both new public and private housing materialising in the months that followed,"
"However, it certainly seems as though Labour’s first budget since 2010 has derailed the positive momentum building across the construction sector, with output levels falling in the months since," he adds.
"Whilst it could be argued that there’s a seasonal element at play here in the run-up to Christmas, the budget itself was considered a largely negative one for the construction industry and its impact is likely to be felt long beyond the closing months of 2024,"
"The general consensus is that, despite some announcements on infrastructure investment, Labour simply didn’t go far enough in addressing the more prominent issues such as rising material costs and supply chain issues. At the same time, Labour’s hike to National Insurance Contributions has been a bitter pill to swallow, reducing the appetite for recruitment and further straining the labour shortage,"
Halls continues, "Of course, there are additional factors impacting construction output that have been at play for far longer than those announced via the Autumn Budget. Perhaps the most significant is the bottleneck being caused by the building regulations implemented since the Grenfell tragedy. Whilst wholly necessary, we’ve seen delays with respect to remediations on existing developments and, in turn, this has caused a logjam for any new developments over seven stories in the last two years.
"If Labour is to meet its target of 1.5m new homes over the next five years, it certainly needs to do more to stimulate the industry that will help them to achieve it and investing in more skilled construction workers is, at least, a step in the right direction.”
