Kelly Boorman is national head of construction and partner at RSM UK
Given the government’s stated priorities to accelerate housing delivery and drive economic growth, it’s no surprise that last week’s Autumn Budget announced further plans to stimulate construction activity and improve social housing provision.
The allocation of an additional £5bn in funding to support housing delivery will go some way to alleviate supply chain tensions and prevent businesses from becoming distressed, but unanswered questions remain.
“We’ll likely see SMEs face trading challenges, potentially leading to further insolvencies or acquisitions by larger firms”
The prime minister’s pledge to remove anti-growth legislation and red tape will support housebuilders delivering mandatory targets and encourage quicker mobilisation of projects. Contractors are often held back by procurement and delays, which can result in eroded margins before the contract even starts – which has previously led to eyewatering losses in the case of legacy contracts.
So it was encouraging to see chancellor Rachel Reeves dedicate £3bn in funding for SME builders, demonstrating that all businesses have their part to play in achieving the national housing target of 1.5 million homes. Increasing the amount allocated to the affordable homes programme to £3.1bn means registered providers of social housing can see that the government’s focus is set clearly on delivering affordable homes.
But housebuilders as private developers often fund the gap between build costs and social housing contributions to achieve site affordable targets. Therefore, with target volumes set to increase it could make some projects untenable, especially because of labour shortages.
We still await the outcome of the ‘brownfield passport’ consultation, with government seeking views on land remediation incentives for regeneration of disused brownfield land to build new homes.
Businesses are awaiting clarity on major infrastructure projects too, so we expect an update on these developments in the incoming housing strategy, which is due to be published in spring 2025.
With £80m already allocated through the Brownfield Land Release Fund 2 (BLRF 2), it is likely this funding will increase to support councils with local costs to develop these sites in the next five years. By localising these responsibilities, towns and cities will have better management over their infrastructure needs, to ensure greater connectivity between housing, healthcare and education.
National Insurance challenges
As anticipated, the rise in National Insurance and reduction in thresholds were announced, which will impact the supply chain to the industry, increasing material and labour costs. As a result, we’ll likely see SMEs face trading challenges, potentially leading to further insolvencies or acquisitions by larger firms. SMEs are crucial in delivering housing needs, due to their agility, innovation and knowledge of local markets, so it’s important the government continues to support businesses of this size.
The Budget also outlined more than £1bn in funding in 2025/26 to improve building safety and regulation, in particular cladding remediation. While this announcement signals that the government is taking responsibility and accepts that regulation urgently needs to be funded, this could have implications for contractors.
Although there’s reason for cautious optimism, there’s still some uncertainty. The industry is awaiting the outcome of the National Planning Policy Framework, which will dictate how soon the government’s housing strategy can be realised.
There’s also concern that, while increased funding (£2.5bn) for skills training over the next three years will help to address skills gaps in the construction sector, this isn’t soon enough. As it stands, 9 per cent of the UK’s workforce are in construction, yet there’s a 250,000-person labour shortage to address if the government is to meet its 1.5 million worker target by 2028.
Furthermore, the chancellor failed to address how technology and innovation in collaboration with Skills England will be implemented across the sector to increase efficiency and meet targets. Adopting new technology will encourage collaboration between experience and innovation, helping to bridge the gap in skilled labour, strengthen the supply chain and address workforce constraints, especially as the industry transitions to greener methods of building.
