HBF news briefing: Wednesday 21 October

One of the most comprehensive surveys of Small and Medium Enterprise (SME) house builders, conducted by the Home Builders Federation (HBF) and Close Brothers Property Finance, has found that:

• Two thirds of SME house builders (65%) have said their growth projections are down due to COVID-19 – close to 40% report growth to be down by up to 50%
• 76% of SMEs use Help to Buy and the new regional thresholds are expected to prove to be a major barrier, with a number of respondents highlighting challenges in their specific regions (case studies included)
• Planning delays and securing permission remain a major barrier to housing delivery over the next 12 months, according to 83% of respondents.

Stewart Baseley, Executive Chairman, HBF, comments: “As we look to boost housing supply post the coronavirus lockdown it is vital we support SME builders such that they can play their part. Increased bureaucracy and regulation and a harsh operating environment has seen the number of SME builders plummet in recent decades. Government needs to work with industry to develop policies that allow SMEs to grow. Doing so will increase housing supply, create jobs and stimulate economies across the country.”

Reduced growth and delivery

When asked about business growth post COVID-19, nearly two thirds of respondents (65%) have said their growth projections are down. Of this figure, 39% of respondents said their growth projections are down between 10-50%, with over a quarter (26%) seeing their growth projections fall between 0-10%. 

Help to Buy

Help to buy has been a lifeline to this part of the market with 76% of the survey respondents using the initiative on 39% of their new homes sales (mean average). 

The hiatus of construction during the coronavirus lockdown and the inhibition of production capacity due to social distancing measures on sites have inevitably resulted in delays to build programmes. As such, there are thousands of property purchases at risk of falling through as they are ineligible for the new scheme; either because of the purchaser’s eligibility or because of the regional price caps that will come into effect under the new, 2021-23 Help to Buy programme. 

Planning

Planning continues to be a particular concern when it comes to industry growth and the delivery of homes. Indeed, 83% of respondents cited delays in securing planning permission or discharging of planning conditions by local authorities as a major barrier to increasing housing delivery over the next twelve months.  With 73% of SME housebuilders seeing a lack of resource in local authority planning departments as a major barrier. (Ref. Table 1). 

SMEs are disproportionately affected by planning setbacks, as they may have their capital tied up in just one or two projects at a time. As a result, lengthy delays can bring their business to a halt. 

CBILS

SME developers have had varying degrees of success in accessing the Government’s financial support measures for businesses introduced in the wake of the coronavirus pandemic, with some facing numerous challenges including delays, inconsistent approaches from lenders and a refusal by some to lend to the real estate sector, in their attempts to access financial support. 

Just over half of the respondents (53%) have tried to access supports through CBILS and of these, only 44% of respondents had been successful. 

Development Finance

In the challenging post-Covid environment, the availability and terms on which development finance is offered to SME developers will continue to be of considerable importance. It is encouraging that development finance was rated as the lowest barrier to growth by SME housebuilders, with 41% not considering this to be a barrier to growth.(Ref. Table 1). 

Labour and growth

A third of respondents (33%) do employ apprentices and train new employees, and they make up 19% of their workforce, on average (just under 1 in 5 employees). 

Nearly half (48%) of all respondents do not employ apprentices or train new employees, with 19% previously employing apprentices, but not currently. 

The full report can be read here. 

The Site Operating Procedures have been updated to reflect recent changes in Government guidance. Whilst there are no significant changes to social distancing requirements on sites, the Construction Leadership Council (CLC) has taken the opportunity to streamline the Site Operating Procedures whilst maintaining the familiar format. 

Changes to the Site Operating Procedures - Version 6 include:

• Current requirements such as social distancing are referenced on page 1 making it easier to update in future
• The CLC statement on The Use of Face Coverings is included
• Updated guidance on shielding, self-isolation, testing and what to do if a worker develops COVID-19 symptoms or has to self-isolate
• Confirmation that canteens serving food must display an NHS QR Code
• The wording has been reviewed throughout to reflect the fact that social distancing is no longer exceptional, and that in some key areas Government has published more detailed guidance or updated terminology. 

Cases of coronavirus are increasing across all four nations, and sites are urged to remind the workforce of the importance of social distancing outside of work, in order to protect themselves and others and help keep construction sites open. 

Read more about it here.

Speaking at a press conference, the Prime Minister, Boris Johnson, confirmed that Greater Manchester will move into the ‘Very High’ alert level. This means that:

• Pubs and bars must close unless they are serving substantial meals
• Households can’t mix indoors or in most outdoor settings
• In some public outdoor spaces, groups must be limited to the rule of six
• Travel into and out of the area is strongly advised against. 

Mr Johnson also stated that discussions on moving South Yorkshire, West Yorkshire, Nottinghamshire and the North East into the Very High alert level will continue. South Yorkshire has since been moved under these restrictions. 

The Prime Minister’s full statement can be read here. 

The Treasury has confirmed that the Comprehensive Spending Review will be for one-year, in order to prioritise the response to Covid-19 and focus on supporting jobs. The review will set departments’ resource and capital budgets for 2021-22, and Devolved Administration’s block grants for the same period. 

The review will focus on:

• Providing departments with the certainty they need to tackle Covid-19 and deliver the Plan for Jobs.
• Giving vital public services enhanced support to continue to fight against the virus.
• Investing in infrastructure to deliver the Government’s plans to unite and level up the country, drive economic recovery and Build Back Better.

More detail can be found here.

Health and Safety Executive (HSE) inspectors carrying out a month-long initiative designed to check up on firms’ health standards around dust inhalation are also checking for compliance with COVID-19 rules. 

The regulator is carrying out unannounced inspections of construction firms throughout October to ensure businesses have safe initiatives in place to protect their workers’ lungs from the likes of asbestos, silica and wood dust. 

Read more here. 

The Construction Leadership Council has published guidance on the movement of people and workers into the UK in respect of the expiration of the transition period with the European Union at the end of the year. 

The guidance offers an overview of the new points-based immigration system, the Common Travel Area (CTA), the skilled worker route, the shortage occupation list, how to become a licensed sponsor, the rights of EU, EEA and Swiss migrants, the mutual recognition of professional qualifications and the Construction Industry Scheme (CIS) as well as useful links and resources. It is appropriate for all businesses across the industry and along the supply chain. 

The guidance has been issued by the Movement of People Workstream of the CLC BREXIT Working Group and comprises the second publication in a suite of business readiness advice that the group intends to publish ahead of 31 December 2020. 

Access the guidance here.

House sales rose by 21.3% in September following the introduction of the stamp duty holiday, data from HMT shows. 

Key points:

• residential property transactions rose 21.3% in September following introduction of stamp duty holiday
• rise in sales supports hundreds of thousands of jobs in the sector – with new homeowners also spending extra cash on decorating, furniture and appliances
• 33% of homebuyers plan to spend their savings from the tax break on home improvement and renovations, boosting business and jobs. 

More information can be accessed here.

Research by TwentyCi, a consultancy firm, has found that an increased demand in house buying, fuelled by a temporary stamp duty holiday, has piled pressure on conveyancing solicitors, mortgage lenders and surveyors to push through purchases. 

The hold-ups have led mortgage brokers to warn home movers not to delay if they want to capture stamp duty savings of up to £15,000. Legal & General Mortgage Club said home movers now needed nearly four months to complete from start to finish. 

More on this story can be found here. 

The data from the August 2020 House Price Index shows:

• On average, house prices have risen 0.7% since July 2020.
• There has been an annual price rise of 2.5%, which makes the average property in the UK valued at £239,196.

The regional data for England indicates that the:

• South East experienced the greatest monthly price rise, up by 1.6%.
• North East and South West saw the lowest monthly price growth with 0.0%.
• East Midlands experienced the greatest annual price rise, up by 3.6%.
• North East saw the lowest annual price growth, with a rise of 1.0%.

Additionally:

• London shows, on average, house prices have risen by 0.9% since July 2020.
• Wales shows, on average, house prices have risen 2.1% since July 2020. An annual price rise of 2.7% takes the average property value to £172,828.

The data can be found here.

Rightmove’s House Price Index found the average price of property coming to market increased by 1.1% (+£3,534) this month, to an all-time national record of £323,530 and 5.5% higher than a year ago. This is the highest annual growth rate for over four years. The momentum caused by the combination of pent-up and new demand has led to new records in several key metrics, and as a result Rightmove forecasts that the annual rate of increase will rise further before the year-end and peak at around 7%. 

The House Price Index also saw three new records for market activity:

• The average time to sell is now 50 days, which is 12 days faster than the same period last year.
• For the first time ever, estate agents now have more properties marked as sold than they have as available for sale.
• The number of sales reported by agents also set a new record, and was 70% higher than the same period a year ago.

Rightmove also recorded a 49% increase in traffic in September compared to the same period last year, which is the biggest year-on-year jump since 2006. So far in October the number of sales agreed is still 58% up on the same period last year. 

Further detail on September’s figures can be found here.

HM Revenue and Customs has published monthly property transactions completed in the UK with value of £40,000 or above in September 2020. 

Key points:

• The provisional seasonally adjusted estimate of UK residential transactions in September 2020 is 98,010, which is very similar to September 2019 at only 0.7% lower and 21.3% higher than August 2020.
• The provisional seasonally adjusted estimate of UK non -residential transactions in September 2020 is 9,160, 6.3% lower than September 2019 and 18.7% higher than August 2020. 

The CPA main scenario for construction output in 2020 is a 14.5% fall as the construction industry shows promising signs of recovery from the coronavirus pandemic. Demand for new private housing and private housing repair, maintenance and improvement (rm&i), as well as strong growth in the infrastructure sector, are expected to support recovery for the industry towards the end of this year and into the next following historic falls in output during lockdown. The prospects, however, of both a deterioration in labour market conditions along with a potential ‘No Deal’ Brexit deal at the end of December mean that the upcoming winter will be decisive for how far such a recovery can be sustained. 

The Construction Products Association’s (CPA) Autumn Scenarios, published today, continue to expect a tick-shaped economic recovery as the most likely outcome, with output for construction rising by 13.5% in 2021 from the sharpest fall on record in 2020. 

The easing of lockdown measures over the summer was accompanied by a rush to meet pent-up demand, particularly in private housing and refurbishment work that couldn’t take place as sites were closed. With social distancing integrated on construction sites, productivity was also able to pick up. 

The CPA points out that the housing market is being given a boost from pent-up demand coming through and transactions being brought forward by both the stamp duty holiday and the end of the first phase of Help to Buy in March 2021. Equally, private housing rm&i has benefitted from home working brought on by the pandemic. With more disposable income as a result of spending less on travel and hospitality, many households are choosing to spend it on ‘safe’ options such as home improvements. 

Some caution remains from 2021 Q2, however, with the end of the stamp duty holiday and uncertainty in the employment market possibly reducing demand. 

The autumn scenarios can be read in full here.

Construction companies have taken more emergency loans than any other industry, the British Business Bank has revealed.

Building firms have taken just over 218,000 loans across the Coronavirus Business Interruption Loan (CBILS) and Bounce Back Loan schemes. The next highest borrowing level was seen in the motor trade, which has taken out 207,000 loans.

Construction was the second highest borrower by value, with £7.93bn worth of loans agreed up to 4 October. The only sector to take on more debt was the motor industry, which agreed loans to the value of £9.56bn. 

Experts believe some firms have been taking loans so that they would be available as a contingency. 

Read more about this here. 

The Planning for the Future consultation proposes reforms of the planning system to streamline and modernise, bring a new focus to design and sustainability, improve the system of developer contributions to infrastructure, and ensure more land is available for development where it is needed. 

The consultation closes on 29^th October 2020. 

To view the documentation and information on how to respond, please visit the website. 

The County Councils Network (CCN) have commissioned a report from Catriona Riddell Associates on planning reforms and the role of strategic planning.

The CCN said it had long advocated for a stronger approach to strategic planning in order to achieve better place-making outcomes. It said it would consider the recommendations as part of the network’s response to the Planning for the Future White Paper and will work with its members and stakeholders to explore the merits of these proposals in further detail. 

The report, Planning Reforms and the Role of Strategic Planning, recommends:

• The creation of strategic planning advisory bodies in all areas, comprising of all council leaders, mayors (where relevant), Local Enterprise Partnerships, Sub-national Transport Bodies and leaders from the health and environment sectors. This would be a statutory responsibility and their geography covered would be agreed first by local councils across an area and approved by the Housing Secretary for the government.
• Together, all the parties on these bodies would perform a ‘ringmaster’ role for setting out a long-term vision for the area: joining up economic, infrastructure health, and environmental aims with housing. These would pinpoint where growth is to take place and what type employment is needed; playing an enabling role for reshaped town centres and local economies post-Coronavirus, whilst balancing health and environmental factors.
• These ‘advisory bodies’ would produce a ‘strategic integrated framework’ – setting out what infrastructure is needed to accompany development in each area, identifying what areas need to be connected to improve growth and create new jobs, alongside addressing climate change issues. These frameworks would then provide a basis for individual councils’ Local Plans.
• With councils facing huge shortfalls in infrastructure funding set against projected housing development, a ten-year delivery plan should be produced alongside the framework on how to unlock infrastructure funds: this could be a ‘whole is greater than the sum of its parts approach’ by pooling together councils’ resources to unlock large-scale infrastructure projects, whilst enabling more private and public investment due to having a long-term shared vision outlined in each area.

The report can be read here.

CPRE, the countryside charity has today published a report on the state of brownfield land in 2020. The report suggests:

• Brownfield registers show that there is enough brownfield land for 1,061,346 housing units over nearly 21,000 sites, covering almost 25,000 hectares.
• There is currently planning permission for 565,564 units, or 53% of the total brownfield housing capacity.
• There is currently land provision for over 1.5 million homes using brownfield land and other land with planning permission, providing enough land to meet the government’s 300,000 homes a year target for the rest of this parliament.
• Brownfield sites that have begun being developed and have since been omitted from the registers provide an additional housing capacity of 78,000 units. Bringing the total brownfield housing capacity to 1,144,665 units.
• Since the first registers, a total of 7,383 sites have been added and 4,694 sites omitted from the registers. Of these, 2,844 or 61% could be matched with development projects.
• There have been 2,689 net additions to the registers since their conception, providing an additional 145,206 housing unit capacity.

The report can be read in full here.

New research calls on Government to improve apprenticeship system to create a better skilled workforce for vital infrastructure projects. 

High skills, high tech construction apprenticeships are needed to boost the skills needed in infrastructure projects to drive the UK’s economics recovery. 

Authors of a new research report released this week, entitled Build Back Better: Improving the apprenticeship system to better support infrastructure, are calling for this. 

The report, written on behalf of the Construction Industry Council (CIC), University College of Estate Management (UCEM) and the Technical Apprenticeship Consortium (TAC), with data used from a CIC survey of employers, recommends that Government works with CIC, employers and the professional bodies to:

• recognise the value of technical and higher-level apprenticeships leading to professional registration;
• increase the flexibility of the apprenticeship levy;
• join up and improve the apprenticeship systems across the UK;
• celebrate and promote apprenticeships.

The Welsh Government have announced a short ‘firebreak’, lasting two weeks, will be introduced across the country from Friday 23^rd October, to help get coronavirus under control. 

The restrictions under the firebreak include:

• People must stay at home, except for very limited purposes, such as for exercise.
• People must not visit other households or meet other people they do not live with either indoors and outdoors.
• All non-food retail, hospitality businesses, including cafes, restaurants and pubs (unless they provide take-away or delivery services), close contact services, and events and tourism businesses, such as hotels must close.
• Secondary schools will re-open after half term for years seven and eight, and vulnerable children. Primary and special schools will re-open as normal after half term.
• Local parks, playgrounds and outdoor gyms will remain open.

Full details of the firebreak can be found here.

The Welsh Government has U-turned over its planned ban on maintenance and repair work in private homes during the country's two-week ‘firebreak’ lockdown. 

The original guidance said that tradespeople could only carry out work in homes during the firebreak if the work was urgent, or to repair a fault posing a direct safety risk. The advice stated that even if work had begun, it could not be finished. 

However, the guidance has since been revised to state that tradespeople can work in homes “as long as it is managed in a safe way and both the worker and household members are well and have no symptoms of coronavirus”. It adds, however, that the Welsh Government recommends “people consider whether the work can be safely deferred until after this short lockdown”. 

The story can be read in full here.

Build UK has issued a template letter for construction workers in Wales to carry in case they are pulled over by police during the nation’s two-week ‘firebreak’ lockdown that begins on Friday.

New regulations announced this week see widespread economic restrictions come into effect from 6pm on Friday 23rd October.

More can be read here.

As a result of the firebreak, Welsh Minister for the Economy, Ken Skates, has announced an expansion of the Economic Resilience Fund to support businesses. 

In September, Mr Skates announced £140 million would be made available for businesses. The newly bolstered package will now see £300 million made available. Under the new funding:

• Every business covered by the small business rates relief will receive a £1,000 payment.
• Small and medium-sized retail, leisure and hospitality businesses, which have to close will receive a one-off payment of up to £5,000.
• There will also be additional discretionary grants and support for smaller businesses, which are struggling.
• The £80 million fund announced last week to help businesses develop in the longer term, will be increased to £100 million, which includes £20 million ring-fenced for tourism and hospitality.

Businesses will also be able to access the support available through the existing Job Retention Scheme or the new expanded Job Support Scheme. 

More information can be found here.