House building slows in London as cost of construction rises

Construction output is slowing as labour shortages and cost increases have an impact on house building activity, warns the Mayor of London.

Government data shows that the cost of construction materials such as steel, timber and concrete rose by 23% last year – roughly equal to the increase seen over the previous 12 years in total.

The inflation rate of construction materials also reached a 40-year high in 2021, according to data from BCIS.

A survey from the Federation of Master Builders (FMB) found 95% of builders have seen a rise in material costs, with 74% feeling under pressure to pass these costs onto the consumer.

Earlier this month, the Mayor revealed that the UK-wide vacancy rate in construction has risen to its highest recorded level since 2001 and vacancies in construction were 40% higher in summer 2021 than before the pandemic.

The Mayor of London warns that the combination of price rises and workforce shortages is likely to have a significant impact on the delivery of new homes in the capital, repeating his call for the government to provide additional grant funding for affordable housing in London to reflect the growing financial pressures on councils and housing associations.

The Mayor of London, Sadiq Khan, said: ‘Since becoming Mayor, I have made tackling London’s housing crisis one of my top priorities. From City Hall, we have worked tirelessly to get London building again, but the twin effects of the pandemic and Brexit has hit both housebuilders and consumers hard.

‘Put simply, materials and labour are needed to build homes. Earlier this month, I called on the Government to create a temporary visa scheme for construction workers, which would go some way towards alleviating the debilitating double impact of Brexit and the pandemic on the building industry.

‘I am also calling on ministers to provide the increased funding for genuinely affordable housing in London that I have long called for and which is needed now more than ever. Without bricks and mortar, and enough skilled workers, the excellent progress we have made in delivering the good quality and genuinely affordable homes that Londoners need is at risk of stalling.’

Brian Berry, Chief Executive of the Federation of Master Builders (FMB), added: ‘For over a year, small builders who deliver new housing and improve existing homes either through extensions or by retrofitting, have been struggling with the twin challenges of rising prices for essential materials and severe labour shortages. Today’s State of Trade Survey data from the FMB shows these pressures aren’t going away, and there are now added fears about the impact of rising inflation.’

Photo by Bethany Opler