On 23 June 2016, 17,410,742 British citizens voted in the EU Referendum, voting to leave by a majority of just under 52 percent.
Since that date, financiers have seen huge volatility across all sectors. This article examines the impact of Brexit on the construction market today.
The Impact of the Brexit Vote on the UK Economy
Analysts estimate that the deficit created in the UK economy, to date, could be as much as £40 billion. Economists on all sides agree that potential for harm can only intensify.
However, though aviation, financial services, pharmaceuticals and the automotive industry have all been hit heavily, not all industries are impacted to the same degree. For more information, explore the attached infographic.
UK Shortages in Affordable Housing
The UK was in the grip of a housing crisis long before Brexit was conceived. The problem is clear: there simply are not enough affordable homes to meet demand.
In 2017, the UK government announced plans to deliver 300,000 new homes every year by the mid-2020s. Some believe this is not enough. The National Housing Federation warns that more is needed, calling for the construction of 340,000 homes per year.
The UK housing crisis has triggered sharp increases in property prices, with the average UK home costing £224,144, according to data gathered by the UK Housing Index.
Meanwhile, an estimated 200,000 empty or second homes are left dormant in the UK for more than six months. The Office of National Statistics reports that, in England and Wales, the average home costs almost eight times the average full-time worker’s salary, placing them out of reach.
Over the last 20 years, the rental market has doubled in size, with 20 percent of residences privately rented, equating to 4.9 million homes.
Rents take a large proportion of salaries, particularly for homes in major cities. Renters in London spend an average of 49 percent of their salary on rent, according to the Office of National Statistics. With rents at a premium, there simply is not enough money left to save for a deposit on a mortgage.
UK Planning Reforms
In 2018, the government announced a number of measures aimed at providing more new homes. Explore the attached PDF to learn more.
Brexit’s Impact on Construction?
Though there have been mixed effects on various other sectors, the Mid Group Chairman Sahel Majali points out that the UK’s desperate shortage in affordable housing will not abate any time soon. As Sahel Majali indicates, there is a strong demand for starter homes, particularly within London, with a number of local authorities commencing major building programmes for the first time in three decades.
Admittedly, the high-end residential side is beginning to slow down, attracting less investment. Nevertheless, good–quality projects continue to move forward.
The UK government continues its commitment to expanding local infrastructure, constructing schools, hospitals and roads. Construction of Hinkley Point is well underway.
With or without Brexit, we need more homes. According to Shelter, a housing charity, the UK needs around 1.2 million new homes for younger families who have been priced out of the property market and otherwise face a lifetime of insecure, expensive private renting. Of an estimated 277,000 homeless people in England, Shelter points out that the most commonly cited reason is because they lost a privately rented home.
As Sahel Majali points out, there are numerous reasons to remain optimistic about the UK property market, with major government schemes incentivising developers.
With many who survived the Grenfell Tower fire waiting many months to be rehomed, the government has re-emphasised its commitment to the 10–year building programme, committing a further £2 billion. For more information about this programme, view the attached video. Come what may with Brexit, in the UK today there remains an unquenchable thirst for affordable homes that is extremely unlikely to abate any time soon.