Industry leaders warn ministers that tax hikes and regulations are driving a ‘full-blown crisis’ as new project starts collapse.
Construction industry warns of ‘full-blown crisis’
The Construction Growth Coalition (CGC) has issued a stark warning to Business Secretary Jonathan Reynolds, declaring the UK construction industry is in a “full-blown crisis.” They have demanded urgent government intervention to prevent further collapse.
The coalition, representing 45,000 members across the GBP141 billion sector, is pushing for specific policy changes. These include reducing employment costs, easing regulatory burdens, and lowering taxes. Their aim is to prevent more businesses from going bust.
This urgent appeal follows alarming figures revealing a 92% drop in major infrastructure project starts between July and September. Industry leaders fear the sector is on “life support” unless immediate and decisive action is taken by ministers.
Project starts and insolvencies
Recent data paints a challenging picture for the UK construction sector, highlighting significant declines across multiple metrics:
- The total value of construction projects started between July and September fell 21% to GBP20.3 billion compared to the same period last year.
- Starts on Nationally Significant Infrastructure projects, such as power stations, roads, and railways, plummeted by 92% to just GBP115 million.
- Private housing project starts decreased by 34%, while non-residential starts saw a substantial 45% reduction.
- Construction vacancies experienced a 20.5% fall in the three months to September, marking the steepest decline of any industry.
- The sector also shed 23,000 jobs between March and June, indicating a significant workforce contraction.
- In the year to September, 3,873 construction firms entered insolvency in England and Wales, a higher number than any other industry.
New homes and infrastructure at risk
The severe downturn in construction directly threatens the government’s crucial targets for new housing and national infrastructure development. Ministers have committed to building 1.5 million new homes across the country.
A struggling construction sector makes these ambitious goals increasingly difficult to achieve. Delays in major projects, from essential transport links to new energy facilities, could have significant long-term economic repercussions for the country’s growth and competitiveness.
Beyond large-scale projects, the industry’s decline impacts job security and broader economic stability. The loss of thousands of jobs and a surge in insolvencies could lead to a critical shortage of skilled workers needed for future national development.
Dr Victoria Hills, co-chair of the CGC, emphasised that the crisis “matters for everyone.” This shows the widespread impact beyond just the construction industry itself.
Government’s next moves unclear
The most critical question is how quickly and comprehensively the government will respond to the Construction Growth Coalition’s specific demands for policy adjustments.
- Will ministers seriously consider reversing or modifying contentious tax hikes, such as employer National Insurance contributions or changes to Business Property Relief, which the industry blames for increased costs?
- What concrete steps will be implemented to streamline the planning process, which the industry consistently identifies as a major source of project delays and uncertainty?
- How will the government’s substantial GBP725 billion infrastructure investment translate into tangible project starts on the ground, especially given the recent 92% decline in major schemes?
Government policy must rebuild trust, not just projects
The government’s strategy for the construction industry appears fundamentally misaligned, simultaneously setting ambitious building targets while implementing policies that industry leaders claim are actively hindering progress. This contradiction is unsustainable and counterproductive.
It is unrealistic to expect the delivery of 1.5 million new homes or vital infrastructure improvements when the very companies responsible for these projects are facing unprecedented financial and regulatory pressures. Ministers must align their actions with their stated goals.
A more collaborative approach, genuinely engaging with the Construction Growth Coalition to address specific concerns like employment costs and planning delays, is essential. Failing to do so risks not only the government’s development agenda but also the long-term health of a crucial economic sector.
The current situation suggests a need for a policy reset. The government should demonstrate a clear commitment to fostering growth rather than imposing further burdens on an already struggling industry.
Industry campaign pushes for change
The immediate focus will be on the response from Business Secretary Jonathan Reynolds to the Construction Growth Coalition’s urgent letter and its detailed demands for policy changes.
- The CGC’s ongoing campaign will continue to advocate for change across six key areas, including skills development, tax and fuel cost reductions, planning regulation reforms, and mental health support within the industry.
- Future data releases on project starts, company insolvencies, and employment figures in the coming months will be crucial indicators. They will show whether the industry’s downturn is beginning to stabilise or if further decline is imminent, shaping the political debate.
