UK construction house building
There was a 7% increase in new homes being registered with the NHBC, suggesting further growth in housing completions over the coming yearsReuters

House building is growing fast in the UK but the construction industry is being held back by a serious skills shortage and a lack of small building firms, according to a leading player in the sector, and unlikely to meet the country's housing need anytime soon.

The National House Building Council (NHBC), an insurance and warranty firm that covers 80% of the market for new homes, released figures showing it recorded 139,975 housing completions in 2015, up 17% on the previous year. Registrations with NHBC for new homes to be built – a lead indicator of future completions – jumped 7% over the year to 156,140, an eight-year high.

Both figures include private, affordable and social housing. Almost all registrations convert into completions, though it can take longer than a year depending on how quickly construction work progresses.

Estimates vary on the country's annual housing need from 200,000 to 300,000. A shortage of housing, which is particularly acute in London and the south east of England, has driven up rents and house prices in recent years as the population grows. The government is targeting 200,000 new homes a year by 2020.

"Most commentators say that as a country we need to build around 250,000 homes a year, something like that," Mike Quinton, chief executive of NHBC, told IBTimes UK. "And even at the peak before the recession we were not there. Could I see us getting there as a country? Yes, but not in the near term."

Skills shortage

There are several brakes being applied to the construction sector, Quinton said. A construction skills shortage was by far the biggest issue, he said, and the industry is working to train up a new generation of workers as well as attract those who left after the financial crisis, when output collapsed, back again. "It's that highly skilled labour people are after," said Quinton, much of which has to come from within the UK.

He also downplayed any risks to house building from the EU referendum, which will take place by the end of 2017. If the UK withdraws from the EU, it will again put bureaucratic hurdles in the way of migrant labour from Europe and threatens to worsen the construction skills shortage.

Data from the Office for National Statistics (ONS) and the Organisation for Economic Co-operation and Development (OECD) suggests around 10% of the UK construction sector's workforce are foreign-born.

"If there is a Brexit – and it's a massive if – what does that mean? That they have to get visas to come here? If the demand is there, then that would happen, one would like to think," Quinton said.

"When you've got a government saying we're absolutely committed to growing the number of houses, you've got demand in the economy for those houses, then I can't believe that they'd put barriers in the way."

Peter Andrew, deputy chairman of the Home Builders Federation (HBF), said the NHBC figures are encouraging because they show a "massive increase" in completions and he sees more growth in new home numbers over the coming years, possibly even hitting the government's 2020 target of 200,000 a year.

But he said the lack of small and medium home (SME) builders – 80% of which left the industry in the tumult of the financial crisis – will be essential to getting those homes finished. "We need to make it easier for SMEs to get back into the marketplace," Andrew said. "And that's around planning, it's particularly around finance, and making it easier in terms of finding land."

He pointed to government efforts to free up public land for SME builders to develop as well as the creation of finance packages so they have the funding to do so. "All of this is aimed at trying to get more SMEs in because we need to get that sector back so that we've got a full industry," he said. "In other words, we've only got two-thirds at this moment in time. We need to aim at that bottom end and there's a lot of focus on that. And that will help us get to these numbers and beyond."