Worries about Britain’s construction crunch are overdone

Sir Keir Starmer has promised to run a government for the builders, not the blockers. Certainly, the prime minister and his colleagues have given the builders a lot to do. Alongside commitments at the election to build 1.5m homes and decarbonise the electricity grid within five years, the government has also revived several megaprojects, including a new rail line connecting Oxford to Cambridge and a third runway at Heathrow.

All that adds up. Capital investment in energy, transport, data centres and the like will more than double over the next five years, according to Boston Consulting Group (BCG, see chart 1). Housebuilding will also need to rise by over a third to hit the targets. Can Sir Keir find the builders? Worrywarts in the construction industry fret that he will struggle. Sceptics say the government should take things more slowly.

That would be a mistake. The history of past building booms shows that, when demand is strong enough, work gets done. Construction in Britain surged during the housing bubble of the 2000s, pulling over half a million workers into the industry. Many left after the financial crash of 2007-09, and have stayed out. After the second world war, Britain’s physical landscape was remade on a vast scale. Further back, in the 17th century nearly the entire City of London was rebuilt within a decade of the Great Fire, and to a much higher standard. Labour markets can quite effectively shuffle workers round when a sector has more capacity and can offer higher wages.

That does require politicians to be flexible. London was rebuilt so quickly in the 1660s and 1670s only because occupational licensing rules were loosened and restrictions relaxed on imports like Scandinavian timber. (“The Norwegians warmed themselves comfortably by the fire of London,” went a saying at the time.) Access to European workers speeded construction a great deal in the 2000s; Irish workers were important in the post-war years.

What about today? The starting-point is hardly ideal. The share of workers in construction is at a record low (see chart 2). Industry surveys still say that planning restrictions are the biggest block to building, but labour and materials shortages figure, too (see chart 3). One London-area contractor laments that young people would rather work from home than on a building site, and that lots of Polish workers have left Britain for Spain, with warmer weather and more jobs. Green rules are also increasing the complexity of construction work.

None of that should surprise, given how little Britain has built over the past few decades. It will take a strong pipeline of projects and—at least for a time—higher wages to pull more people into the industry. The road will be bumpy. Plenty of skilled trades take years to learn. Heavily regulated sectors, like water or energy, may struggle to pass along price increases, notes Raoul Ruparel of BCG. That risks handicapping them in the fight for workers. Britain’s post-Brexit migration rules are hard to navigate for self-employed construction workers. Letting its immigration-reducing zeal impede building would be a self-inflicted wound for the government.

“It’s a mighty task,” says Ian Fletcher of the British Property Federation, a trade group. But the reward is enticing, too. One reason why building projects in Britain so often balloon in cost and overrun deadlines is that there is no consistent flow of them, helping teams build experience. Productivity in the industry has languished for decades; labour-saving advances like Japanese modular construction techniques have not taken root. If Britain is lucky, Labour’s big push could be demanding enough to change all that.■

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Correction (February 11th 2025): The original version of this article misstated by how much housebuilding will need to rise to meet government targets. Sorry.