Rishi Sunak will have to call a general election before the end of the year. With the bookmakers predicting a change of government it promises to be the most significant poll in decades. Over the next few months, Building will have a political focus: what do the parties have to offer? What does construction want and need? We kick off our coverage here by examining the state of play on some of the big issues affecting the industry
Project delivery
The state of play
It has not been a good year for project delivery. HS2 has been lopped down to a remnant of its original route amid ballooning costs. The government’s plan to build 40 new hospitals by 2030 has also gone awry, as it has been forced to push eight of the schemes beyond that target due to the crisis over unsafe concrete. Meanwhile, the Conservatives have all but abandoned their housing targets at a time when punishingly high interest rates are making it near-impossible for young people to buy their first home.
Modern methods of construction (MMC), the go-to solution for many of these problems, is hardly in good health either. The built environment’s great hope for bringing down project costs and speeding up delivery has fallen on hard times, a victim of many of the forces that have caused problems elsewhere in the industry.
Ilke Homes collapsed spectacularly last July, just five years after the modular housebuilder was founded. This came two months after L&G announced it was ceasing production at its timber-frame modular housing factory after racking up £174m in losses. Then there was the debacle over the modular schools built by collapsed offsite firm Caledonian Modular which have had to be demolished, the administration of House by Urban Splash and most recently the failure of housebuilder Modulous.
Britain’s commentariat are increasingly asking why this country appears no longer able to build anything. As the next election approaches, politicians are searching for some kind of positive vision that will drag the UK out of its stagnation.
What are the Conservatives saying?
For the Conservatives, this positive vision does not currently appear to include MMC. Housing minister Lee Rowley warned in December that the government could not continue to prop up the offsite sector indefinitely. The party had pledged to support MMC in its 2019 election manifesto – still its current mandate – but Rowley said its aspirations had “not yet” been achieved and subsidising it forever would “not work”.
Brighter news for the sector can be found in the New Hospital Programme (NHP), which was rebooted last year with £20bn of funding and a new standardised construction approach called “Hospital 2.0”. The repeatable reference designs for the new hospitals are nearly complete and expected to be revealed in May.
This is expected to be a much larger version of the government’s £1bn prisons programme, which has seen four contractors collaborate on an alliance contract to build four new adult male prisons using modular designs and shared supply chains. That programme is widely seen as a trailblazer and a success in terms of productivity, minimising costs and simplifying delivery.
But Hospital 2.0 will be an order of magnitude larger, so big that leaders of the programme have said a “national industry” will be needed to supply the required modular components at scale. This is a huge vote of confidence in MMC and provides exactly the kind of certainty of pipeline needed to mature the sector.
What is Labour saying?
Labour has said little on project delivery that differs from the Conservatives. While shadow health secretary Wes Streeting has been highly critical of the delays to the NHP, Labour has not said it will change the programme.
The party has also been quiet on MMC, but it has announced a major review into infrastructure delivery to be led by Juergen Maier, former head of rail firm Siemens UK. The review will look into issues including the planning system and supply chains in order to keep costs on major projects down.
Party leader Keir Starmer has notably promised to build 1.5 million homes over five years, which would equate to the current government’s shelved 300,000 homes a year target. To achieve this, he has pledged to “bulldoze” the planning system and fight the practice of land-banking by developers.
What is the industry saying?
“It will be absolutely paramount for the new government, whichever colour, to prioritise and provide clarity on which schemes will be moving forward.” So says Victoria Head, commercial and performance director at healthcare infrastructure consultancy Archus.
Trudi Sully, UK and Europe lead for industrialised design and construction at Mott MacDonald, said: “I would welcome a renewed unity, consistency, determination and drive to take the good work delivered to date [on MMC] and create a catalyst for accelerating uptake and adoption of industrialised construction.”
Mark Farmer, founding director of CAST and MMC champion for the government, said: “Construction businesses will have little incentive to invest in improving competency unless they can see sufficient workload in front of them.”
Housing and planning
The state of play
Housebuilders have much to be glum about when it comes to recent policymaking. A parliamentary term which began with a radical and ambitious planning white paper looks likely to end in open hostility between industry and government.
Former housing secretary Robert Jenrick’s proposals for sweeping reforms to the planning system, which would have introduced a zonal operation with automatic permission granted in certain areas, were themselves swept away, with his successor Michael Gove effectively watering down local housing targets. When Gove set out the long-awaited National Planning Policy Framework at the end of last year, there was on the surface plenty for housebuilders to cheer about. He revealed plans to introduce sharper accountability in the form of league tables for planning authorities and threatened to take legal action against councils without local plans.
But, when it came down to it, none of these measures made up for the headline ditching of compulsory housebuilding targets for local authorities. Add this to the ever-growing regulatory burden and developers are facing further headaches when they bring schemes to planners.
Nutrient neutrality rules from Natural England are currently holding up 150,000 homes according to the Home Builders Federation, while building safety and biodiversity net gain are adding costs for developers.
What are the Conservatives saying?
If the Conservatives are re-elected, much will depend on whether Michael Gove returns as housing secretary. Though big housebuilders might loathe him, there is no doubt that Gove is an energetic and self-directed minister and, if he returns to DLUHC he is likely to want to continue what he has started.
On the one hand, this will probably mean progress on nutrient neutrality. The housing secretary has promised to agitate for a change to law “when the government is re-elected later this year”. On the other hand, it would mean more energy devoted to breaking things up at the top of the industry, which the secretary of state believes operates like a “cartel”. A Competition and Markets Authority study into the sector prompted by Gove has already uncovered alleged breaches of the Competition Act by eight UK housebuilders, with a subsequent inquiry launched into whether they shared sensitive information.
One Gove agenda that is very clearly shared by his prime minister is his desire for cities to deliver the lion’s share of the country’s housing need. Leeds and Cambridge have been named in recent speeches as areas ripe for heavy development, with the latter likely to have a development corporation created. Conservative housing policy is likely to focus on encouraging intensive brownfield development alongside demand-side measures.
What is Labour saying?
If the Tories’ approach to housing going into the election can be summarised as “more homes in cities”, Labour’s might be described as “more homes in more places”. While housing was largely ignored at the most recent Conservative party conference, at Labour’s it was a staple, suggesting it is likely to be a major election plank.
Pitching Labour as the party for “the builders not the blockers”, Starmer hinted at a willingness to tackle the green belt taboo and “get Britain building”. No wonder seven in 10 housebuilders have backed his horse for the next election, according to Knight Frank. Labour has pledged to deliver more than 1.5 million homes over a five-year period, which may be functionally equivalent to the Conservatives’ 300,000-a-year target, but the fact that it has pledged to reinstate mandatory housebuilding targets for local authorities suggests it could be more serious about hitting them.
Starmer has also announced plans to build “the next generation of new towns”. Under the proposals, large new settlements would be built on land acquired by government-backed development companies for lower prices. The Labour leader also proposed re-writing planning rules to set new design standards aimed at creating “gentle urban development” in the style of Georgian five-storey townhouses. Developers meeting the standards would be given planning passports making it easier for them to build on brownfield land.
It will not be a free ride for developers and housebuilders, however. Labour wants to increase the number of social and affordable homes to 150,000 per year and shadow chancellor Rachel Reeves has spoken of the need to “strengthen the rules to prevent developers from wriggling out of their responsibilities” to this end.
When it comes to environmental regulatory issues, Labour’s position appears a little more confused. Labour peers blocked the government’s nutrient neutrality reforms last summer and, at its subsequent conference, Shadow housing and planning minister Matt Pennycook was less than clear about how the party planned to unpick the problem.
What the industry is saying “Someone needs to sit back and do a review of all [regulations] and say, are we absolutely certain that we need to be doing this?” So says Bob Weston, chair and managing director of Essex-based housebuilder Weston Homes.
Net zero
The state of play
Net zero has become of the most contentious areas in politics. The UK’s legally binding target of achieving net zero by 2050, combined with the climate change committee’s roadmap showing the steps needed to achieve it, is driving government policy. The problem is that there is a growing backlash against the perceived costs of such policies at home and abroad.
One of the most visible examples has been the farmers’ protests across Europe. Closer to home, the London mayor’s extension of the ultra-low emission zone to outer London boroughs has seen a spate of ULEZ enforcement camera vandalism and, more significantly, was behind Labour’s defeat at the Uxbridge and South Ruislip by-election last July.
Labour was widely expected to win in an area affected by the expanded zone, but the Conservative candidate scraped home after declaring that the by-election was a referendum on ULEZ expansion.
This result is believed to have been a factor in the prime minister’s decision to water down net zero polices last September and create a clear dividing line with Labour. Rishi Sunak has delayed the ban on new petrol and diesels cars from 2030 to 2035 and a ban on new oil-fired boilers from 2026 to 2035.
What are the Conservatives saying?
The King’s Speech last November included the intention to introduce legislation to allow companies to bid for new oil and gas drilling licences in the North Sea. A group of Conservative MPs, the Net Zero Scrutiny Group, are calling for cuts in green taxes as they say the measures impoverish working people. Pressure to water down net zero commitments also comes from right-wing newspapers including the Daily Telegraph and Daily Mail as well as from the threat from Reform UK. Reform says it would abandon all existing net zero targets to save a claimed £20bn a year for the next 25 years.
Last September Sunak watered down net zero commitments including the deadline to phase out petrol and diesel cars and oil-fired boilers, but he upped the heat pump grant from £5,000 to £7,500.
What is Labour saying?
The Labour Party has focused on reducing carbon emissions. Inevitably, this means net zero policy will be one of the most hotly contested areas at the election.
In September 2021, shadow chancellor Rachel Reeves announced that the party would spend an additional £28bn on green measures a year, adding up to more than £100bn over a four-year term. Since then, clear downward pressures on public spending have put pressure on this pledge.
In June last year, Reeves reaffirmed the pledge but this time ramping it up to £28bn a year by the second half of the next parliament – assuming Labour win two terms. That revised promise included the £8bn a year announced by the government in the 2021 spending review.
More on the election 2024
Building kicks of months of general election activity
School buildings crisis: What can the next government do to save our schools and colleges?
Election year: why there is so much at stake for construction
In February this year, Labour watered down the pledge again, cutting the £28bn to less than £15bn, of which only £4.7bn would be new money. The new investment adds up to £24bn over the life of the parliament.
Before this latest cut the ambition was to upgrade 19 million homes to at least an EPC C rating within a decade. This has now been scaled back to just £1.3bn a year to upgrade five million homes over the course of the parliament.
Recent government figures have cast doubt on this aspiration. Just 2,900 properties have been upgraded under the government’s Great British insulation scheme since it started eight months ago. The £1bn scheme aspires to improve 300,000 homes over three years. At current rates that would take 60 years to complete.
Sources close to the scheme say it was overly bureaucratic. More worryingly for Labour, there are not enough specialists who want to take on the work.
The most ambitious net zero goal so far set by Labour is to decarbonise UK power by 2030, rather than 2035. This would be delivered by a new body – Great British Energy – which would be set up with £8.3bn. At the launch Starmer said it would cut energy bills for families by £1,400 a year and create half a million jobs.
However this ambition is likely to come up against the same problems as retrofitting homes. Chris Skidmore, the former Labour MP who was chair of the government’s net zero review described the ambition as “impossible”.
What the industry is saying
“On housing retrofit, following Labour’s U-turn on large-scale public funding, it will be interesting to see how they approach promoting incentives into the private housing market,” says Simon Rawlinson, head of strategic research and insight at Arcadis.
Brian Berry, chief executive, Federation of Master Builders, says: “A key priority for the new government should be to focus on closing the skills gap, which is undermining productivity and economic growth. With the introduction of the Future Homes Standard in 2025, there are serious doubts about whether the construction industry has the specialist skills available to deliver.”
Election focus
As thoughts turn towards the next general election, the UK is facing some serious problems.
Low growth, flatlining productivity, question marks over net zero funding and capability, skills shortages and a worsening housing crisis all amount to a daunting in-tray for the next government.
This year’s general election therefore has very high stakes for the built environment and the economy as a whole. For this reason,
Building is launching its most in-depth election coverage yet, helping the industry to understand the issues in play and helping to amplify construction’s voice so that the government hears it loud and clear.
We kick off this month with a three-parter looking at the state of play across three key topic areas.
Building is investigating the funding gaps facing the next government’s public sector building programmes, looking at the policy options available to the political parties.
In the coming months our Building Talks podcast will focus on perhaps the hottest political topic: the housing crisis. The podcast will feature interviews with top industry names who side-step soundbites in favour of in-depth discussions.
As the main parties ramp up their policy announcements, we will keep you up to date with their latest pledges on our website through our “policy tracker”.
No comments yet