Northern Powerhouse sees 12 month housebuilding boom

Scape Group, the built environment specialist, has published the first edition of its Regional Construction Industry Tracker, looking at the health of the industry across Britain’s 11 regions.

Using ONS Construction Output data between Q2 2014 and Q2 2015, the report reveals some stark regional differences in output across infrastructure, public and private housing, the public sector, industrial work, commercial work and repair and maintenance. Construction output is the estimated monetary value of construction work undertaken in each region.

Key findings:

  • The Northern Powerhouse regions saw 30 per cent growth in construction of homes in 12 months.
  • Scotland’s construction industry is booming, with more than 20 per cent growth on last year.
  • Construction of public sector housing in London and the South East fell by more than 25 per cent compared to the same time last year.
  • Yorkshire and the Humber and Scotland both saw construction activity in the public sector grow by more than 33 per cent.
  • Wales more than doubled its construction activity on infrastructure projects over the year.

The Northern Powerhouse’s total output was £29.1 billion, just short of London’s total output of £30.33 billion. The figure demonstrates the importance of the Northern Powerhouse as a centre for construction activity, a key economic indicator, and the potential benefits of greater interconnectivity between the cities and regions in the North of England.

Overall housebuilding was up over 8 per cent on the previous year, but it was in the north that housebuilding saw the most growth. There was a housebuilding boom in the North of England, with construction output up by 33 per cent in the North West and almost 30 per cent in the North East. Collectively the Northern Powerhouse regions increased construction output in housing by as much as 30 per cent.

However, the past year has revealed a North-South divide when it comes to the balance between public and private housing. Yorkshire and the Humber saw a big increase in construction activity on public sector housing schemes – an increase of almost 80 per cent on the previous year, compared to a 20 per cent growth in construction of private housing. Scotland also performed well with 50 per cent growth in public sector housing activity.

Meanwhile in London and the South East, where the housing crisis is most acute, construction of public sector housing fell dramatically. In the South East, construction of public sector housing fell by 25 per cent, while in London there was 32 per cent fall – even when the private sector in London saw 15 per cent growth in private housebuilding activity. The figures demonstrate how local authorities and housing associations are struggling to invest in new projects in London and the South East, and perhaps losing out to the private market when it comes to new sites and land buying.

Although the north demonstrated strong growth overall, Yorkshire and the Humber saw an overall decline in construction output of more than 7 per cent, with every sector except housebuilding and the public sector seeing a decline. A 34 per cent increase in public sector output and a 24 per cent increase in housebuilding in the region helped to conceal a significant decline across all other sectors.

The report will make positive reading for the Scottish government, with a strong performance across all sectors of the construction industry. Scotland saw a 20 per cent increase in overall construction output, with new housing and public sector work fuelling growth. Scottish contractors benefitted from a steady pipeline of projects in the run-up to the May 2015 general election.

The report reveals a mixed picture for Wales. Although output on infrastructure projects in Wales increased by 104 per cent, driven by more road and renewable energy projects, the overall figure for construction output was down 1.6 per cent on the previous year. With more major infrastructure projects such as the South Wales Metro and the Swansea Bay Tidal Lagoon in the pipeline, growth in infrastructure activity is well placed to continue, but the wider construction industry in Wales may struggle to keep up. Now that debate around the 2015 Planning Act (Wales) has concluded, the property industry in Wales may pick up however.

Mark Robinson, Scape Group Chief Executive, comments on the report:

“The last 12 months have been a very positive one for our industry – investment in new buildings is underpinning the success of the wider economy and providing a strong foundation for future growth. But there are a number of issues that we need to tackle as an industry – we have a severe skills shortage and an ageing workforce, and without more skilled professionals and better training, projects will increasingly face delays and capacity issues.

“Our report reveals some stark differences between the regions, particularly in vital areas like infrastructure and public sector housebuilding. There is a clear north-south divide when it comes to public sector housing, and we need look at the reasons why places like London and the South East are seeing big declines in construction activity on public sector housing, when the private sector is growing. Even more so when we can see that Scotland and the Northern Powerhouse regions are increasing construction activity in both public and private housebuilding.”

“The government has made investment in infrastructure a top priority, which is great news for the wider economy, but we also need to ensure that all regions benefit from investment. If the Northern Powerhouse is to become a reality, we need a more long-term and joined-up approach to planning new infrastructure.”

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