Richard Cook of Pegasus Group on why housebuilding needs an urgent fix

Richard Cook is senior director of economics at Pegasus Group

While output often falls in December due to the holiday period, coupled with only modest GDP growth of 0.1% in Q4 2025, it paints a worrying picture.

The government deserves praise for keeping construction on the agenda and proactively addressing deep-rooted issues in the sector. Yet the fact remains that Britain is not building with the cohesion required, and certainly not with the urgency needed to fulfil the government’s lofty 1.5-million-new-homes development target.

Planning has long been a point of contention, and while efforts are being made to streamline approvals and prioritise the most valuable projects nationwide, the logjam is far from cleared.

The Building Safety Regulator, while instituted for an important reason, has not been effective in practice. The gateway 2 construction approval stage has been made more concise, which should alleviate hindrances, but delays at gateway 3 (the final check before a building is occupied), look set to rear their head. Many developers are decreasing the height of their proposals to below the 18m, seven-storey threshold at which the regulation kicks in – hardly a positive step towards increasing housing supply.

The government’s funding commitment towards local planning authorities is also welcome. But in practice, this is likely to equate to just one additional planner per council, hardly moving the needle.

Meanwhile, the New Homes Accelerator, the initiative to kickstart housebuilding on sites facing delays, has now been expanded to smaller sites in its second phase, which should mean it takes far less time to develop homes. While much of the policy impetus has been directed towards large sites in recent months, accelerating a more agile SME sector with the development of smaller sites should help the government meet its housing targets far more quickly.

Consultations on the revised National Planning Policy Framework (NPPF) have also helped. The changes proposed in December signal the most significant update to the NPPF since its introduction in 2012, and it is hoped that this will make a big dent in housebuilding targets. A streamlining of the planning system is sorely needed, but as with any large policy change, the minutiae will be crucial and steer the course of planning decisions for years to come.

Lingering skills shortages

Housebuilding ambitions are still being hampered by lingering skills shortages. The latest CITB Outlook suggests the UK needs a total of 293,300 extra workers over the next five years. Only 19% of construction workers are under 25, and an ageing construction workforce – with many retirements pending – heightens the labour shortage.

There are plans to create 13,000 apprenticeships and T-level placement opportunities to boost construction careers, but perhaps more importantly there needs to be a cultural change in the way we approach construction careers. Far from being low skill or low income, they offer strong financial and career benefits, as well as requiring considerable learning and development via apprenticeships.

The government deserves credit for its efforts to address the raft of development challenges it inherited. Yet in many cases, the results are likely to come years down the line, when there is every chance the current government will no longer be in power. Quicker development and stronger acceleration of the pipeline is required, or we risk remaining in this stagnant period. While current headlines hardly augur positive outcomes, there are bases for optimism, and a more positive sector outlook cannot come soon enough.

Richard Cook is senior director of economics at Pegasus Group