A “severe” market downturn will see new housing starts drop by 40% this year – the biggest fall since the 2008 financial crisis, new figures have revealed.
Statistics released in the UK Trade Skills Index 2023 have revealed a dire situation, with the Government unlikely to hit the target of 300,000 new homes built each year by the middle of the decade.
The figure for 2022 was around 215,000. But for 2023, the report has indicated that rather than rising to hit the target set in 2019, it will instead reduce by almost half in 2023 to around 130,000 new homes.
The negative outlook follows a difficult period for housebuilders battling worsening circumstances including the war in Ukraine, slow local planning, and the pandemic aftermath.
That’s as well as persistent inflation and the resulting increase in interest rates, which has seen the average quoted mortgage rate jump from 1.4% to 5.7%.
The UK Trade Skills Index 2023 was commissioned by tradesperson directory Checkatrade and undertaken by leading independent macro-economic research firm Capital Economics.
And according to the report, the housing market chaos will now mean a sharp fall in house prices and downturn in transactions. A year-on-year fall of 10.5% in house prices this year is now anticipated, before growing 1.3% and 4.8% in 2024 and 2025 respectively.
‘Things will get worse before they get better’
The report also revealed a huge skills gap in the UK’s traditional trades sector, something Checkatrade is looking to tackle with the ‘Get In’ programme, a newly launched campaign aimed at getting more young people under 25 years old into the trades.
Richard Harpin, the founder of HomeServe, which acquired Checkatrade in 2017, said: “The findings of this report are striking and it appears that target for 300,000 homes a year will be a step too far.
“A hugely difficult few years including slow local planning decisions, the pandemic and war in Ukraine have had a detrimental impact on the UK’s housing market.
“It appears there are glimmers of hope there but I’m afraid these figures indicate things are going to get worse before they get better.”
The report said that looking forward, the dramatic weakening in the housing market over the next two years will weaken growth in new construction output in the near term.
But while the fall in prices and housing starts is “significant”, the period of market weakness will fall short of that seen after 2008’s financial crash. With banks now well capitalised, lenders will be in a better position to support the eventual recovery “quite quickly”.
That will help a faster than anticipated recovery, the report said, with construction output likely to grow by an average of 1.6% in the years to 2027. Later, and into the next decade, new build housing will be constrained by the expected deceleration of growth in the number of households. It predicted new work to grow on average by 1.2% a year in the years 2028 to 2032.
The missing million
Statistics released through the UK Trade Skills Index reveal the huge skills gap facing the UK construction and repairs industry, with trade sector vacancies at record highs. That’s due to an ageing workforce, exodus of EU workers post-Brexit, and the cost of living crisis.
All in all, the UK will need almost a million new recruits in the sector over the next decade just to keep pace with demand.
Those two factors combined have created an “urgent and alarming” need for more young people to enter the traditional trades.
To combat the issue, entrepreneur, and investor Richard Harpin and Checkatrade are spearheading a series of new projects focused on school leavers and young people aged under 25.
The ‘Get In’ programme is a new campaign aimed at getting thousands more young people aged 16 to 25 into trades careers through apprenticeships.
It will seek to capture young people’s CVs and connect them to opportunities within Checkatrade’s membership base, as well as large trade employers and SME trade businesses.
Melanie Waters, Managing Director of Trade-Up and Checkatrade’s Get In programme, said: “It’s a sorry state of affairs for the construction sector when you view this major need for homes alongside the gaping skills gaps seen across the traditional trades.
“With our new campaign, we are looking to do our bit to solve at least part of this urgent problem.
“It’s crucial to acknowledge the role that apprenticeships will play in bridging this divide and shaping the future of the industry.
“Our upcoming campaign, named Get In, aims to address this challenge, and make a substantial impact, and we’d encourage more young people to get involved and submit CVs, so we can help bridge the divide.
“We’re excited to collaborate with industry leaders, government officials and regional decision makers to inspire and motivate a new generation of tradespeople to join our industry.”
It is the third year in a row the annual UK Trade Skills Index has been published. It said that of the 937,000 tradespeople reported to be needed to meet demand within the next decade, nearly a quarter of a million – 244,000 – must be qualified apprentices to plug a growing skills gap.
Most pressingly, it said vacancies in the trades are now at record highs, with widespread shortages particularly prevalent among plumbers, bricklayers, carpenters, and electricians.
