Tim Barrett, chair of the Construction Alliance North East (CAN), discusses barriers to achieving the 1.5m homes target and how SMEs could be crucial to it
The government’s target of building 1.5 million new homes over the next few years is ambitious but as the dust settles on policy announcements and target setting, those of us in the construction sector are left wondering – is it realistic?
The short answer is no, not unless something changes fast.
For those of us in the sector every day, it is increasingly clear that while the will to build more homes exists, the means are sorely lacking. Figures from the National House-Building Council (NHBC) paint a worrying picture. In Q3 of 2023, new home registrations fell by 53% compared to the same period in 2022. Registrations in the private sector dropped by 57% while the rental and affordable sector saw a 43% decline. Overall completions were down 15%. Bungalow registrations hit an all-time low.
Figures released by NHBC show that in 2024, 104,232 new homes were registered, almost identical to the 2023 total of 105,071. This headline stability hides significant movement underneath – private sector registrations increased by 11% to 68,987, while the rental and affordable sector fell by 18% to 35,245.
Completions, however, dropped. A total of 124,144 homes were completed in 2024, down 7% from 133,611 in 2023. The rental and affordable sector delivered 45,824 completions – the second-highest total ever – while private sector completions fell by 10% to 78,320.
This illustrates a continued imbalance between ambition and delivery and shows that the industry is still struggling to meet demand, particularly in the private sector.
It is also a warning sign that the sector, particularly its workforce and delivery structure, is not equipped to deliver 1.5m homes without urgent and meaningful reform.
A workforce on the brink
The skills crisis in construction is well-documented. Industry projections suggest we may be short of up to 300,000 workers by the start of the next decade. That is a staggering figure. When considered alongside the additional demand this housing target places on us, the scale of the challenge becomes clear.
Matthew McCarrick, managing director at McCarrick Construction, and a board member of Construction Alliance North East (CAN), reflects on how these pressures are playing out on the ground: “It’s nothing short of ludicrous to think that our current workforce has the spare capacity to build 1.5m additional homes. We are suffering from a long-term skills gap caused by the same afflictions we’ve been banging on about for years.”
Matthew explains that while the effects of Brexit and the loss of EU labour continue to bite, this is not a new issue: “At McCarrick Construction, we have an ageing cohort of highly skilled tradesmen who are now on the point of retiring. Like much of the industry, we don’t have enough mid-level expertise to mentor the apprentices we’d like to take on. The younger generation is keen – we’re flooded with applications every summer – but financially, we just can’t make it work under the current system.”
The current apprenticeship funding structure is part of the problem. The higher minimum wage and employer National Insurance contributions have not been matched by an increase in the Apprentice Levy. This has left companies like McCarrick Construction unable to justify the cost of bringing in new apprentices, despite the demand.
Matthew continues: “A whole generation is finding access to training vastly reduced. The only effective way to train someone in construction is on the job. But government policy is actively disincentivising this. We are staring at a stagnating industry with no pipeline of skilled talent. It is short-sighted and damaging.”
Matthew is amongst a growing number of voices within the industry calling for a simple but powerful shift – the government to fully fund apprenticeships. “This wouldn’t create an oven-ready workforce overnight, but it would invest in our future. Channelling funding into full-time college courses with little or no site experience is a waste of taxpayers’ money and young people’s time. The hard truth is that these qualifications are seen as worthless by the industry compared to an apprenticeship.”
Untapped labour potential
There are several underutilised areas of the workforce that could offer solutions if approached properly. These include people currently in long-term unemployment, women, those looking to retrain from other careers and even those who have retired but still want to contribute.
Construction is a dynamic, well-paid industry at the forefront of new technology and sustainable innovation. But it is poorly understood by the wider public. Changing perceptions and supporting people to enter or re-enter the sector requires a coordinated partnership between industry and government. Central funding for retraining and entry support could unlock thousands of new workers. So, too, could targeted immigration policy. If construction were treated as a critical skill for visa purposes, we would gain vital capacity while building up domestic training provision.
We must also recognise the value of those who have retired but still have expertise to share. Creating flexible pathways back into part-time or advisory roles could ensure their skills are not lost forever.
Procurement and red tape
Beyond workforce issues, we must address the systemic hurdles that block delivery. The public procurement process is time-consuming, bureaucratic and costly, especially for SMEs.
Ken Parkin from Able Construction, a member of CAN and a long-established construction firm based in the North East, highlights how this affects businesses like his. “Local authorities often forget that SMEs can build houses. I’ve seen councils overlook firms like ours in favour of national players. We’ve got the skills and the local knowledge to deliver; we just need a fair chance.”
SMEs make up the vast majority of the UK’s construction businesses but they are often locked out of larger frameworks or discouraged by the costly and complex bid process. The new Procurement Act aims to simplify this, but risks falling short unless specifically tailored to address SME needs.
A dedicated, streamlined route for SME procurement on housing schemes could transform delivery. Combine this with guaranteed project pipelines, and we would unlock enormous capacity. The government must understand that SMEs need security and fair access to be part of the solution.
We have already seen examples of success where SMEs have been empowered to take part in delivering high-quality housing in smaller developments, often achieving quicker turnaround times and better community outcomes than the major, national firms. These examples should be the rule rather than the exception.
A housing market in need of structural change
The dominance of large housebuilders in the market has led to a model that often does not serve the public good. Land banking, market control and prioritising high-profit units over social and affordable homes mean these large firms are simply not incentivised to meet demand at scale. Their delivery model is based on restricting supply to protect margins.
In contrast, SMEs tend to be more responsive to local needs. They build smaller-scale developments that integrate better into communities. They often produce higher-quality homes because of closer oversight and a greater sense of pride in the final product. They support regional economies and hire local labour. Yet, they are routinely overlooked in favour of large firms with bigger balance sheets and bid-writing departments.
If the government is serious about solving the housing crisis, it must stop treating SMEs as an afterthought. These companies are the key to diversifying the housing market and delivering at volume in a way that matches local demand.
Planning, funding and long-term confidence
The final pieces of the puzzle are planning reform and funding access. It is no secret that local authority planning departments are under-resourced. Even when policy supports development, the practical reality of securing permission often leads to months of delays. More funding and staffing for planning teams would help unlock projects that are ready to go.
At the same time, SMEs often struggle to access affordable finance for development. A government-backed funding facility specifically for SME housebuilders would make an enormous difference. It would reduce risk, increase pace and enable more builders to step up and deliver.
Long-term confidence in the pipeline is just as critical. A clear, consistent commitment from the government to fund and deliver new homes over a 10 to 15-year period would give SMEs the confidence to invest in skills, apprenticeships and capacity.
SMEs also play a critical role in the delivery of sustainable housing and innovation in construction methods. Smaller firms are often at the forefront of embracing low-carbon technologies, modern methods of construction (MMC) and energy-efficient design. Unlike many large developers bound by rigid corporate practices or slow-moving procurement chains, SMEs have the flexibility to trial new building techniques and adopt emerging technologies more rapidly.
This presents a major opportunity not just to increase housing numbers but to improve the quality and environmental performance of homes being built. If properly supported, SMEs could be instrumental in helping the government meet its environmental targets as well as its housing targets. The shift to net zero in the built environment will not happen without this layer of the industry being involved. The government must therefore ensure that any incentives or policy frameworks aimed at green construction are designed to be accessible to smaller firms and not just the larger players who tend to dominate lobbying and consultation processes.
A call for action
As the UK faces mounting pressure to meet housing targets, the role of SMEs has never been more crucial. They are not just the backbone of local economies but also key drivers of innovation and quality. Smaller, more agile teams can adapt to specific community needs, implement sustainable practices and deliver projects that are in tune with local environments.
If the 1.5m homes target is to become a reality, the government must prioritise practical measures that empower SMEs. This includes addressing the skills gap through fully funded apprenticeships, simplifying procurement processes and ensuring smaller builders are fairly included in housing schemes.
There is also a social value case to be made. SMEs train local people, support regional supply chains and reinvest in their area. The more support SMEs receive, the more inclusive and resilient the housebuilding sector becomes. By creating an ecosystem in which local businesses can thrive, the government will not only build more homes but help strengthen the fabric of the regions most in need of investment and regeneration.
Without a genuine shift in policy and a commitment to supporting SMEs, the target will remain far out of reach. SMEs have the ability, the expertise and the desire to contribute to solving the housing crisis, but they need the right environment to flourish.
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