There will be a general election at some point in the next year, and though speculation is rife, there is no certainty as to when it will happen. The latest that a general election can be held is the 28th January 2025 and whether the current Prime Minister, Rishi Sunak, will take it to the wire remains to be seen. 

Polls suggest that Labour is currently most likely to succeed at a general election, and it is likely that Rishi Sunak will wish to reverse this trend prior to calling an election. He will make every effort to deliver on his promises to sway voters towards the Conservatives and some of his most significant considerations will include the state of the UK's economy and progress against his ambitious housebuilding, retrofit and infrastructure goals.

Current housing market situation

Supply and demand for housing is balanced on a knife edge and estimates suggest a shortage of 4.3 million homes [1] for those that need them, aggravated by soaring interest rates which have created a cost of living crisis and plunged over 50,000 [2] homeowners into negative equity. 

The Construction Products Association has forecast a 6.8% [3] decline in new-build housing, repairs, maintenance and improvement which is in part due to the cessation of the Help to Buy scheme which incentivised first-time buyers to purchase rather than rent a home. This lack of government support coupled with eye-watering mortgage rates is causing prospective buyers to adopt a cautious position.

There have been many high-profile construction company insolvencies in 2023, so investor confidence is judged to be low and the high cost of raw materials, coupled with uncertainties in the supply chain are further restricting construction activity. 

Political party promises

The Labour party leader, Sir Keir Starmer, promised to build 1.5 million new homes over the next 5 years if he is elected as Prime Minister. He pledged to create new towns on unused urban land, overhaul the current planning system and disincentivise foreign buyers to preserve housing stocks for British citizens.

The Conservative party has as yet failed to achieve their target of building 300,000 new homes a year, although they have reaffirmed their commitment to the UK's construction industry and have pledged to relax planning regulations in cities by allowing vacant retail premises to be converted to homes and to support the conversion of barns, warehouses and agricultural buildings for the same purpose.

Challenges to overcome

There are three main challenges facing the construction industry at present and it remains to be seen how each political party will address them in their party manifestos. These are:

1. Obtaining investment. While the UK's economic outlook remains fragile, there is little appetite to invest in the construction industry. Strong government support for UK housebuilding will be necessary to overcome this challenge and enable retrofit and new-build projects to progress at the desired rate.

2. High costs. Raw material costs have soared by up to a staggering 32.8% [4] over the last 2 years, placing incredible pressure on construction companies whose clients' budgets may no longer reflect reality. Continued global political instability continues to threaten the availability of key building materials and disrupt the supply chain, creating backlogs, delays and cost increases. A resilient UK supply chain is necessary for stability of costs and planning purposes.

3. Skilled labour shortages. The construction industry is already holding circa 38,000 vacancies [5] and it is estimated that up to 500,000 construction workers will retire in the next 15 years. The end of "Grandfather rights" has the potential to affect up to an additional 60,000 workers, who may, if they do not achieve formal accreditations and qualifications, lose their right to a Construction Skills Certification Scheme card. It is vital that concentrated effort is made to upskill and retain existing talent, attract new starters to the industry and to highlight the breadth and variety of roles that are available within the industry. 

A glimmer of hope

The Conservative party's commitment to environmental sustainability has seen increased uptake in repair, maintenance and refit activities which is likely to continue irrespective of which party achieves success at the next general election. For construction companies, this provides a sliver of certainty and may increase investor confidence. 

In conclusion, the 2024 UK general election could have a dramatic effect on the construction industry and we at Build Space hope that it is a positive one. 

Resources:

[1] https://searchland.co.uk/blog/insights-from-brickflows-white-paper#:~:text=The%20UK%20is%20facing%20a,recommendations%20for%20a%20way%20forward. 
[2] https://www.thisismoney.co.uk/money/markets/article-12724547/More-households-fall-negative-equity-amid-anaemic-UK-growth-think-tank-warns.html#:~:text=into%20negative%20equity%3F-,That's%20the%20warning%20from%20a,tank%20amid%20'anaemic'%20economic%20growth&text=House%20prices%20will%20fall%206.5,equity%2C%20a%20new%20report%20warns. 
[3] https://www.constructionproducts.org.uk/publications/economics/construction-industry-forecasts/construction-industry-forecasts-autumn-2023/ 
[4] https://assets.publishing.service.gov.uk/media/64a2d21045b6a200123d479d/Construction_Building_Materials_-_Commentary_June_2023.pdf 
[5] https://www.statista.com/statistics/1323178/job-vacancies-in-the-construction-sector-in-the-uk-by-quarter/