No longer a nation of shopkeepers

This week we continue to see the effects of the economic downturn, most markedly in the retail sector with high profile business failures, but also with the severe warnings from the Construction4Growth lobby (supported  by the BWF) that unless the Government take affirmative action, real growth in the construction sector is 10 years away.  Looking for the silver lining is tough, but if we look into the detail of the latest Construction Products Association Forecasts we are anticipating a 6% growth in private housing starts.  Amongst the doom and gloom this is good news surely?

Clearly any growth is good news, but we can knock off about a 2% of this growth due to declines forecast in public sector housing – fundamentally the sector remains depressed.  We are currently building roughly half the 223,000 required according to the 2011 Housing Strategy.  This strategy highlighted that getting “new house building moving was central to plans for economic growth” – in 2012 we built less houses than we did in 2011 and growth in 2013 still doesn’t bring us back to the 2011 levels, let alone the peaks of the mid 2000’s.  So good news, but it is all relative!

Beyond the immediate economic incentives (every £1 pound spent £3 to the economy), there are longer term issues here.  Official figures unearthed by the HomeOwners Alliance have revealed that the high point in homeownership in the UK was 2002, when 69.7% of households were owner occupied. The rate has plummeted since then to a low of 64.7%, a level last seen in 1988, when Mrs Thatcher was promoting ‘the right to buy’.   The report estimates that the slump in owner occupied properties has resulted in a 1.4 million fewer homeowners than otherwise would have been the case, had the previous trend continued. By 2016, that shortfall is estimated to jump to 2.4 million. Currently the silver pound is helping to prop up the economy with those retired on final salary pensions well off compared to future generations – many pensioners today have the advantage of owning their own property, add rent in a market that is under-supplied to this mix and the maths don’t quite add up.

Through the Construction4Growth research, delivered in person to 11 Downing Street last week, it has been highlighted that Investing quickly in shovel-ready projects such as the repair and maintenance of roads, housing, schools and hospitals. To boost the economy now, 'shovel-ready' construction projects would create employment and improve skills. Unemployment benefits and lost tax revenue for the 150,000 construction workers that are claiming Job Seekers Allowance equates to £2.1bn. Spending £100m on repairs and maintenance could generates 3200 jobs, and boost local economies.

Empowering local authorities to drive growth through construction could begin by lifting borrowing caps on their Housing Revenue Accounts. By removing HRA borrowing caps, there are huge opportunities to empower local authorities to drive growth through construction across the UK.  This measure could free-up an additional £7bn of funding for construction projects in local communities.

If we look specifically at this latter point, we must also look at significant problems currently facing Town Centres.  Town Centre retail tended to sprawl in the late 80’s and early 90’s, but now that the Internet, out of town shopping and the supermarket have taken share, there exists an over-supply.  According to the Portas report town centre vacancy rates doubled in the space of two years to 2012 and we have seen the demise of several big high street chains at the start of 2013.   Even as we emerge from the recession, consumer habits have changed, it is unlikely that we will ever reach the retail capacity that we have again.   If work was done to consolidate retail areas, vacated space at the fringe would be ideal for repurposing to housing and would limit the need to build on the Green Belt.  Policy supporting this would kill two birds with one stone, prevents the demise of the town centre and returns much needed housing.  We have already seen the plans for Nick Boles to free up Commercial Property for conversion to residential, but this could and should be extended.