With both the Bank of England and the government pushing for greater housing production to deal with an overheating market and rising prices, it begs the question: who’s going to build them?
Mark Carney, the governor of the Bank of England, is worried about housing, as apparently is the prime minister, business secretary and other senior members of the coalition. They are concerned about price rises, the market overheating and a shortage of affordable dwellings, and they are also worried about the return of a boom-and-bust economy built on the same foundations that proved so fallible in 2008.
The fact is the UK needs to build around 800 new homes every day for the next 17 years to meet current demand, according to the National Housing and Planning Advice Unit, the former Labour government’s widely quoted advisory body. This figure also takes no account of population growth as a result of immigration and equates to around 5,100,000 houses needed by 2031 or, put another way, 300,000 per year.
To put this into context, we began work on only 133,650 homes over the last 12 months, according to the government’s own figures. It’s going to be an uphill struggle.
It is therefore my view that Messrs Carney, Cameron and Cable are all missing something that is all too apparent to those of us who have the role of tracking costs and managing the process of construction. There are just not enough skilled and trained construction professionals currently in the system to serve the existing need the country has in residential, commercial and infrastructure arenas, let alone build another 170,000 houses a year.
Also, I am not convinced that, in the current expansion phase, our industry has a system of training and skills acquisition for our craftsmen and women that is fit for purpose.
We have more than 400,000 construction workers moving towards retirement in the next five years and conservative estimates say that we are currently set to create 182,000 new construction jobs in the future
We have more than 400,000 construction workers moving towards retirement in the next five years and conservative estimates say that we are currently set to create 182,000 new construction jobs in the near future. These people are essential elements of the construction process and while construction methodology is modernising all the time, it is still a people-based industry.
In a bygone age, one might have looked to the Construction Industry Training Board (CITB) to provide the answer to this issue. They are, after all, the government-supported quango responsible for providing the future tradesmen and women that will populate our industry.
But from my observation the CITB itself is struggling to find an answer. I have a great deal of respect for its chairman James Wates, who is doing his best to reorganise the CITB. He would argue that the CITB is only as good as the support it gets from the contractors with whom they work. Also they cannot expect to be able to “magic up” craftspeople out of thin air. The lift in demand has been as surprising for the CITB as anyone else. However, the numbers do not look good. Last year, 16,000 apprentices started on site with only 5,000 of those coming from the CITB. This is an organisation that levies millions of pounds from contractors, which it then invests into the industry.
Having canvassed one of the largest contractors in Europe and asked their view on the CITB and their ability to provide a workforce of the future, they are less than optimistic. They describe the organisation as being “internally focused”, failing in its ability to be aligned in the direction of travel for the industry it seeks to represent, and most damning is the criticism that, “we do not get the right skills trained at the right time”.
The levy that supports this quango, first formed in the sixties, seems to some as though it is a vestige of a bygone age and needs reform. It does seem strange that the contractors often pay a large sum to the CITB with one hand and then have to claim it back with another.
This is relevant for the economy as a whole because a key issue for the Bank of England is that house price inflation is dictated by supply and demand. The greater the demand, the more likely people will pay a higher price. For housebuilders already facing a drop in margins due to increased costs or the fact that they cannot get bricklayers, dry liners or plasterers without paying a premium means that this area of the construction industry is facing cost push inflation that is getting back to levels we have not seen since the late nineties. This will feed into the economy and interest rates will need to rise significantly to dampen demand. This helps no-one.
Put quite simply the view is that there needs to be government intervention to ensure much greater interaction between the contractors and the CITB, or the UK will need to quickly look elsewhere for the thousands of trained professionals that it needs to build up the housing stocks that so worry Mr Carney. If we really need 33 new houses built every hour, 24 hours a day, for the next 17 years then this industry needs to find a new, well-qualified and well-trained labour force and it needs to find it quickly.
Richard Steer is chairman of Gleeds Worldwide