Skill shortages set to be biggest burden for new home building in the UK

Small house builders in the UK predict that skills shortages in the building industry will hamper housing delivery and will eventually overtake access to finance as a bigger barrier to building new homes, new research suggests.

Overall, the percentage of SME house builders saying that a shortage of skilled workers is a major barrier to their ability to build more new homes rose to 44% from 42% in 2017, according to the annual survey from the Federation of Master Builders (FMB).

A lack of available and viable land tops the list as the most commonly cited barrier with to increasing housing delivery with 59% saying so, followed by 62% believe that the number of opportunities for small site development are actually decreasing, up from 54% in 2017.

Nearly half of small house builders, some 46%,say access to finance is a major barrier to their ability to build more new homes while 51% regard the planning system as a major constraint on their ability to grow.

Indeed, ‘inadequate resourcing of planning departments’ was again rated as the most significant cause of delay in the planning application process for the third year in a row.

When asked to look ahead over the next three years, more firms cited skills shortages as a likely barrier to growth than access to finance.

Brian Berry, FMB chief executive, pointed out that the construction sector is heavily reliant on European Union workers with just under one in 10 workers in the sector born in the EU so Brexit, coupled with the end of free movement, threatens to further intensify the already existing skills shortages.

‘Given that the UK will leave the EU in less than six months, house builders are understandably concerned that skills shortages could worsen and choke housing delivery. In order to combat this skills crisis, the construction industry needs to encourage more entrants into the industry and develop higher quality qualifications. It is critical therefore that the Government doesn’t pull the rug out from under the sector by introducing an inflexible and unresponsive immigration system,’ he said.

‘Our research also shows that the Government must continue to address the issue of access to finance for SME house builders. Although concerns over access to finance have eased slightly in recent years, in part thanks to the Government’s funding schemes such as the Home Building Fund, there is more that can be done,’ he explained.

He also pointed out that it is the low percentages of project cost that builders are able to borrow that remain the greatest financial barrier to increasing their levels of house building. ‘This latest research suggests that if firms were able to borrow 80%, rather than the current 60% to 65 per cent of project cost, SME builders would be able to bring forward on average 40 per cent more new homes. Given the ambitious house building targets the Government is working towards, we cannot afford to ignore such a chance to significantly increase housing delivery,’ he added.

‘A lack of available and viable small sites tops the list of frustrations for SME house builders for the fourth year in a row. Worse still, nearly two thirds of these small builders believe that the number of opportunities for small site development are decreasing. However, the recent reforms to the National Planning Policy Framework, which specify that 10% of a local authority’s housing delivery must be on sites no larger than one hectare, will help to address this problem. This will help to speed up the delivery of homes and lead to a more diverse and resilient housing supply,’ he concluded.