Labour’s chaos is holding back Britain’s builders
STEVEN MULHOLLAND
Today’s S&P UK construction data should set alarm bells ringing in Number 10.
Construction activity across housing, commercial and civil engineering has seen its steepest fall since the pandemic, with new orders nosediving and employment declining for eleven consecutive months.
This is not a natural cooling of the market. It is the predictable consequence of a policy environment that has become more expensive, more uncertain and harder for businesses to navigate. Instead of giving firms the stability to invest, recent decisions have weakened confidence across the construction supply chain at exactly the moment Britain needs it to be firing on all cylinders.
It would be convenient to dismiss this as a temporary slowdown. But if you take a look under the bonnet, underlying problems become clear: a policy environment that has grown more expensive, more unpredictable and far harder to plan around. In the months before the Budget, businesses were left guessing on tax, skills policy and investment rules. That uncertainty now shows up in the figures – weaker orders, falling employment and a supply chain losing confidence fast.
Nowhere is this truer than in plant-hire – the sector the industry body I lead, the CPA, represents.
Our members provide the equipment that enables almost every project in Britain, placing them at the heart of this pressure. They are capital-intensive, asset-heavy and overwhelmingly family-run, with SMEs accounting for 96% of the entire construction sector.
These firms may not attract headlines, but they are indispensable: without them, nothing gets built – not homes, not rail lines, not roads, not public infrastructure. Yet they are being hit hardest by a series of policy choices that make investment more difficult rather than easier.
Two decisions in particular have compounded the problem.
First is the rise in employer National Insurance. At a time when construction employment is already falling, increasing the cost of taking on and retaining staff is a strategic mistake. The wider construction sector needs around 250,000 additional workers simply to meet the infrastructure pipeline, alongside the 161,000 required for Labour’s 1.5 million homes pledge. Making employment more expensive discourages training, slows recruitment and pushes hiring decisions further into the future.
Secondly, uncertainty surrounding the future of Business Property Relief (BPR) in inheritance tax. For family-run firms, BPR is fundamental. Their value sits in machinery, not cash reserves. Weakening or removing BPR would force many to sell essential equipment just to meet a tax bill, undermining continuity and making long-term planning practically impossible. Crucially, this burden falls almost entirely on SMEs; large public PLCs and private equity-backed firms are not exposed in the same way, giving them a competitive edge.
The scale of concern among our members is stark. In a recent CPA survey, 76% said the proposed inheritance tax changes would reduce investment, while 80% fear that passing their business to the next generation would be jeopardised. This is not hypothetical – these are real decisions being deferred now. Fewer machines are being ordered, fewer apprentices hired and fewer upgrades to greener equipment are being made.
This combination of rising costs and tax uncertainty has created a perfect storm. When firms cannot predict future liabilities or trust the stability of the policy environment, they pause. And that hesitation is exactly what the S&P construction data captures: falling output, shrinking order books and a sharp drop in optimism – now at its lowest point since 2022.
There is still time for the Government to reset its relationship with the sector. Providing clarity on BPR, reversing the National Insurance rise and setting out a stable, long-term tax and investment framework would give businesses the confidence they need to start investing again. What the industry needs now is partnership: clear rules, predictable policy and a shared understanding of the scale of Britain’s ambitions.
Our sector wants to invest, wants to hire and wants to deliver the homes and infrastructure Britain urgently needs. But no industry can build on shifting sands. With clarity and stability, construction can once again become a driver of national growth. Without it, Labour’s infrastructure ambitions will continue to drift further from reality.
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This article (Labour’s chaos is holding back Britain’s builders) was created and published by CapX and is republished here under “Fair Use” with attribution to the author Steven Mulholland
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Chris Worrall: Labour’s retreat to fantasy on planning reform has doomed it to failure
CHRIS WORRALL
Chris Worrall was founder of LabourYIMBY and been a long-standing housing advocate and campaigner. He now supports the Conservatives.
The Duty to Co-operate (DtC) has finally been dispatched, and good riddance. Parliament has done the nation the kindness of removing one of the most reliably destructive planning mechanisms ever designed by a British government.
For more than a decade, the DtC strangled Local Plans, torpedoed examinations, paralysed housing delivery, and empowered the most obstinate councils to derail entire regions by simply folding their arms and refusing to agree with their neighbours. Its demise should be a moment of national relief.
Yet instead of applause, we can still hear quiet sobbing, with teary pleas begging for this corpse to be kept on life support “for the current system”.
Catriona Riddell, a familiar figure in the world of strategic planning consultancy and one of housing minister Matthew Pennycook’s trusted confidants, called the abolition “unfair”. Unfair. As though this policy were some noble workhorse, brutally put down after years of loyal service.
The claim is baffling. There is nothing unfair about ending a policy that failed on an historic scale.
DtC failed every time it mattered. It wasted millions. It eviscerated plans that consumed years of staff time, political capital, and consultancy invoices. It played a direct role in leaving four out of five English councils without an up-to-date Local Plan. If anything, the unfairness is that this ludicrous contraption lasted as long as it did.
In theory, DtC required councils to “genuinely agree” on cross-boundary strategic issues. That sounds harmless enough… until you remember what councils are actually like. These are institutions that struggle to agree on bin collection days, let alone housing need, employment land, transport corridors, Green Belt reviews, or new settlements. DtC demanded cooperation in a culture that treats cooperation as a hostile foreign concept.
The result was predictable: councils quietly hired spenny consultants to churn out 200-page Statements of Common Ground written in the tone of a hostage negotiation, only to be rewarded with a dead-on-arrival letter from the Planning Inspector on one tiny point that meant the whole plan was unsound. It was planning Russian roulette, but with every chamber loaded.
Meanwhile strategic planning consultancies thrived. If you were in that line of business, the Duty to Co-operate was a goldmine. Endless rounds of evidence gathering, sub-evidence gathering, cross-boundary alignment workshops, re-alignment workshops, and updates to the updates. For those struggling under the boot of the housing crisis, driven by artificial scarcity, decades of political cowardice, and a planning system captured by consultants, the process offered nothing. They were reduced to numbers buried in a line on a table labelled “Objectively Assessed Need”.
Riddell’s sentimental defence of DtC reveals something deeper and more corrosive: the dominance of a consultant-industrial complex that values process over outcome – paperwork over homes. This is the same complex to which successive British governments have succumbed as the housing staggers from one parliament to the next.
Pennycook should be resisting this complex, not welcoming directly into the heart of policy formulation.
Which brings us to the Labour Government’s view of the current housing slump. At the LPDF conference, the minister reportedly offered a glimpse of what Labour thinks is holding back development: developer greed. In response to serious questions about viability, Pennycook breezily declared that developers should simply lower their margins if they want to build, insisting that “planning reform had been delivered” and that the sector must now “get on with it”.
One industry insider wondered aloud whether this was either “arrogance or incompetence”. It is tempting to say both. At the very least it was wishful thinking dressed up as tough love. This is the same optimistic voluntarism that has derailed every major planning reform since the NPPF.
Telling developers to lower their margins is not policy; it is an exhortation. It is the planning equivalent of asking the weather to behave. Developers do not set land prices; the land market does. Councils cannot conjure infrastructure into existence; delivery agencies do. Viability does not simply improve because a minister declares it should.
It also takes a particular kind of political talent to accuse an industry of greed at the exact moment it has stopped producing anything. Either the greedy developers have gone on hunger strike for fun, or they are feasting on invisible profits. The facts paint the picture: operating margins for major British housebuilders have, under this Government, collapsed from the historical norm of around 20 per cent to nearer five per cent. Companies like Crest Nicholson and Vistry have issued profit warnings.
Rachel Reeves’ Budget debacle and the broader market downturn have only worsened conditions. If this is greed, it is the first instance in history where greed coincides with plummeting returns, falling volumes, and record-level construction insolvencies – obviously a perfect recipe for instilling market confidence.
Pennycook’s comments would be harmless if it were merely rhetorical positioning. But taken alongside the sentimental defence of the “plan-led system”, they reveal a deeper and more worrying belief that planning reform is basically finished, and that responsibility for fixing the system now lies with everyone except government. It reflects the fantasy that the same rules-lite, consequence-free culture that produced years and stagnation will somehow produce a different outcome this time.
It will not: the English planning system’s unofficial motto has long been to repeat failure until morale improves. This brings us to the most saccharine fiction of all: the insistence that the “plan-led approach is, and must remain, the cornerstone of our planning system”.
Pennycook’s version of this line appeared in his recent ‘Reforming Local-Plan Making’ statement. It is a comforting slogan, recited by every minister of every party for two decades. But it is also demonstrably false.
A plan-led system cannot be a cornerstone when most of the stone is missing. Four out of five councils lack an up-to-date plan. Many have no plan at all. We have spent the past decade building a planning system on pure, uncut, high-grade make-believe.
The new reforms promise a faster, more disciplined process. A 30-month window in which to prepare a local plan. Digital maps. Alignment tests. Gateway stages. All of it sounds impressive on paper.
But we have been here before. Governments have announced streamlined frameworks, simplified guidance, and ambitious timetables on a loop for twenty years. None revolutionised delivery because the core flaw remained untouched. The system lacks rules; it lacks consequences; it lacks teeth.
A system without compulsion is a system without delivery. England cannot build homes it needs by asking nicely. And the plan-led system cannot be the cornerstone of English planning until Local Plans – the things that allocate the housing targets – actually exist.
The 30-month local plan timetable has already descended into farce. Thirty months is not a guarantee; it is a decorative number pinned onto a planning culture that has repeatedly failed to produce a plan in under seven years on average. The notion this will rescue the sacred plan-led system is laughable.
This announcement will instead follow the usual arc: celebrated at launch, ignored in practice, and quietly buried when the next government surveys the wreckage and asks, once again, why nothing was delivered.
Until ministers accept that planning requires a rules-based system with sanctions and intervention – not slogans, not guidance, not hopeful nudges – the crisis will grind on. DtC is dead. But unless the system that replaces it actually compels councils to act, the corpse will not be the last thing rotting in the English planning system.