Chairman’s view: What’s responsible for the declining rate of construction output?

I’ve been reading the initial findings from an official Government review into the gap between planning permission being given for new homes and them actually being built, and some of the comments have set me thinking.

Review chairman Sir Oliver Letwin MP says early findings suggest the building industry’s biggest problems are not to do with a lack of skilled workers or a shortage of materials but more about the way developers sell new homes.

Sir Oliver says he is ‘not persuaded’ that the reasons given by Britain’s biggest house builders for the slow rate of homebuilding were true, and accuses them of drip-feeding new homes on major developments to maintain their profits.   

On a broader scale, discussions with our team of regional auditors have thrown up three reasons that are currently contributing to something of a slowdown in construction output as a whole: 

1. Several Hudson Contract clients can certainly endorse the experience of drip-building new homes.

2. Many more of our clients in the fit-out sector report their orders are shrinking because retailers and restaurants are closing on high streets and in shopping centres nationwide. 

3. The Carillion bankruptcy repercussions are leading to stop-start phased building on commercial sites. Some public works contracts have ground to a halt pending the appointment of a new main contractor.  The ripple effect then results in specialist second-tier contractors being forced into closure by Carillion's 120-day credit strangulation.

Here’s what I’m thinking:

Firstly, why risk your business, your capital investment, and all you've built up over the years waiting for five months to be paid, if at all – and if in full? We’ve been talking about shorter payment periods on government contracts for so long . . . surely now it is time for deeds, not words.

Secondly, I take issue with Sir Oliver Letwin about skills shortages.  This is certainly a factor in some regions, including Greater London.  And it’s not only me who believes this.  The Department for Education agrees . . . illustrating a lack of government joined-up thinking.