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Greater optimism among housebuilders

Confidence among housebuilders has improved, with many residential property developers confident that they will succeed in their efforts to build more much needed new homes in the coming months, despite various ongoing market challenges, including the existing planning system, a skills shortage and uncertainty following the EU referendum.

The second annual Lloyds Bank Commercial Banking report on the UK housebuilding sector, released today, is the first in-depth study of the sector following the decision to leave the European Union in June.

The research, which analysed the state of the industry today, and the opportunities and challenges it faces in the future, found that although 36% of housebuilding firms said that the uncertainty following the EU referendum result is the biggest challenge to their business, the industry is relatively optimistic; planning to grow, invest and create jobs.

Optimism about the future of the housebuilding industry improved marginally from 7.1 last year to 7.2 in 2016, with 10 representing the highest level of expectation, and it would appear that this outlook has given the industry the confidence to invest, with average five-year investment plans up 17% year on year.

Housebuilders are also confident about growth, with 42% of respondents saying that their growth forecasts had improved since the EU vote, compared with 27% who said they had declined. They are now predicting an average growth of 28% over the next five years, up from 25% last year.

Pete Flockhart, head of housebuilders, commercial banking, Lloyds Bank, said: “Given the challenges that housebuilders face, the sector is painting a relatively optimistic picture, with improved growth and investment forecasts compared with last year’s survey.

“The wider uncertainty, coupled with the rising cost of materials, presents some challenges but the industry is taking steps to tackle these issues head on, and still plans to grow.”

The rising cost of materials (35%) and the current planning system (29%) were among the biggest challenges that the sector highlighted after the EU referendum result. 

Another major challenge facing the housebuilding sector is the lack of skilled workers in the industry.

Some 30% of firms said there are not enough skilled workers in the industry, with bricklayers, electricians, plumbers and joiners being the hardest to recruit. This shows a slight improvement from the 2015 survey from 35%.

Recruitment and skills therefore remain a focus, with three of the top priorities for firms over the next five years being recruiting additional staff (52%), and investing in training (49%) and apprenticeships (32%).

A quarter of firms are still planning to create jobs to support growth, but this is down from 31% last year. And the scale of planned workforce growth has also fallen back to 22%, from an average of 31% of the existing workforce over five years in 2015.

Despite the fall in plans to recruit, the sector still looks set to create more than 70,000 jobs over the next five years.

Stewart Baseley, Home Builders Federation, said: “The industry is pushing the skills agenda hard. If we are to build more high quality homes we simply have to increase industry capacity. We are looking at how we build our individual sites more quickly; and the measures Government could introduce to allow SME builders to play their part in delivering more homes.

“If we can continue to create an environment in which the industry can grow, as well as delivering desperately needed new homes, we can play a huge part in driving our economy forward.”

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