Migration, demographics, materials and margin - why the 1.5 million homes target runs into arithmetic before it runs into ambition.
A new Prime Minister in Number 10, the second of this parliamentary term and the seventh in ten years, is a symptom of the instability of our society and, by extension, our economy, over the last decade. With difficult headwinds blowing harshly across all sectors, construction in particular has faced challenges few other sectors would have weathered.
The Labour Picture
Focusing on the ten years to now, and starting with Brexit, the vote to leave the EU has had far-reaching effects over the passage of time.
Office for National Statistics (ONS) analysis of the mid-2010s found that around 10% of UK construction workers were non-UK nationals. On the closest comparable measure available today, the Migration Observatory estimated in early 2026 that roughly 15% of the construction workforce was born outside the UK. The two figures are not measured identically, one counts nationality, the other country of birth, and the ONS itself concedes that the fragmented nature of the industry makes these numbers hard to verify with confidence.
It gets more interesting when you drill into the regional picture. ONS found that 28% of London’s construction workers were EU27 nationals, with a further 7% from outside the EU, and a Home Builders Federation census put overseas workers at close to 65% of the capital’s house building workforce. The North West sits at or below the national average, though robust regional data is thin, which is a problem in its own right.
The correlation between our reliance on imported skills and labour and the shortfall of those ready to start work in construction is a testament to the need to focus on vocational skill sets in education, and to give our young people the abilities they need to thrive in the modern construction environment. Not everything can be done by AI.
The Demographic Squeeze
Skills shortages are a prevailing issue, but a secondary pressure sits downstream of the headlines: our ageing workforce. With around 35% of construction workers over the age of 50 and only 20% under 30, the inflow of workers available to fill the gap falls considerably short. These are levers that take decades to move, not parliaments.
With the new Prime Minister pivoting the language behind 1.5 million new homes towards the delivery of council housing, and with Housing Secretary Angela Rayner openly acknowledging that the target is difficult, the industry will be watching the deployment of this policy closely. Given the long-term, systemic issues construction faces, it is unlikely the ambition will be realised over the remainder of this parliament. Every English region fell short of its indicative annual housing need target in 2025, and the Office for Budget Responsibility projects England building around 240,000 homes a year by 2029/30, which is well short of the 300,000 annual rate the 1.5 million figure implies.
Although this is yet another pause and pivot by the sitting government, it is something we have grown used to. Unfortunately, it feeds into the economy through a lack of growth, as endless pauses and an absence of long-term vision and commitment eviscerate confidence.
Costs, Viability and the Pipe Dream Pipeline
As material costs continue to rise, driven by conflicts around the globe, climate change and energy prices, sites that stacked up in 2024 have stalled on viability, unable to turn a profit. This has become a self-perpetuating cycle. On the surface, project pipelines look healthy; but where they fail to factor in the reality of 2026 costs, that is all they remain: pipe dreams.
So, what is the answer? Anyone who claims to have a silver bullet to pull us out of this cycle has not read their brief. The challenges we face in construction need an honest conversation about the difficulties in front of us, and an acceptance that we need long-term strategic planning on schemes that will benefit the country and its population as a whole. We need commitment from central and local government to improve the lives of the people they serve, by ensuring access to good quality housing and to spaces that accelerate good employment and a sense of community.
Margin and the Payment Problem
The private sector in construction would do well to understand its costs better and to make contingency plans for volatility in global markets. A conversation around acceptable profit levels would go a long way towards removing volatility from the market. Average pre-tax margins of roughly 2–3% across the UK’s largest contractors, set against net margins of around 25% in the global technology sector, mean that any cost increase goes straight at the viability of the business, wiping out whatever buffer existed. The two figures are not a like for like comparison, different measures, different markets, but the order of magnitude is the point.
And with that comes payment terms. With such low margins, terms of 60 to 120 days are simply no longer tenable for any business that respects its own existence and its cash flow. The industry has improved and recent legislation has helped, but the reality of chasing debts through the courts often means that any glimpse of realising a profit is extinguished.
Pulling in the Same Direction
To wrap up, the biggest positive impact on construction and on the wider economy would be a recognition that we each have a part to play in doing our bit. Public and private sector paying suppliers on time, training the next generation of tradespeople and professionals together and thinking long term, making sure that due diligence is completed to ensure a project’s viability, not to stifle it before it leaves the corridors of bureaucracy.
