Today’s dire growth figures, driven by a cliff-edge fall in construction, should be a huge worry to the Government. Lower growth and a smaller economy mean that it will be much harder to get unemployed people back to work, get businesses investing and reduce the gap between what we spend and what we collect in taxes.
While ministers and some economists have previously described the latest downturn as a ‘technical recession’, we have now had a period of depressed output longer than during the Great Depression in the 1930s. Seriously worrying stuff.
Shelter has been saying for some time that the Government should take the obvious opportunity to tackle the housing crisis and the economic crisis hand-in-hand. As this table shows, the number of new homes built plummeted through the recession – and it hasn’t recovered since. Today’s fall in construction output of over 5% follows a 4.9% decline in construction output in the last quarter, meaning the size of our construction sector within the economy has shrunk by a huge 10% in just 6 months.
Last October, Shelter and FTI consulting published an economic case for investment in housing. The report found the benefits of building more homes were clear, even compared to other possible stimulus measures such as tax cuts. Not only would investment in housing help us to get back to growth in the short term; it would improve the long term health of the economy. Organisations from the IMF to the UK’s Office for Budget Responsibility agree that the ‘multipliers’ – the added growth boosting effects – of investment in housing outweigh other stimulus measures the Government might take.
With further research by FTI and Shelter showing that the current structure of the UK housing market means that it will never be able to supply enough homes, even when we’re not in recession/depression, all political parties need to tackle this issue head on.
At Shelter, our primary concern is helping people stuck in bad housing or unable to access a place of their own. For my money, there is a clear case for investment in new, affordable housing for that reason alone. However with the economy plunging further into recession, it is clear that there is a purely economic case for building more homes as well.