Housebuilding slump deepens, jeopardising Labour’s 1.5 million homes target

Activity in Britain’s housebuilding sector slowed in August, dealing a fresh setback to the Labour government’s pledge to deliver 1.5 million new homes by 2029.

Closely watched S&P Global data showed residential housebuilding activity fell to a reading of 44.2 in August, with construction sector output declining for an eighth consecutive month. A reading below 50 indicates contraction; the survey results mark the construction sector’s longest downturn since the start of the COVID-19 pandemic.

The slowdown compounds concerns raised by official Government figures published on Wednesday showing that just 38,780 new homes were completed between January and March 2025. That level is slightly more than half the number required every three months to meet the 1.5 million homes goal, which equates to roughly 300,000 homes a year or about 75,000 homes every quarter.

Reaching the 2029 target would therefore require a material and sustained increase in construction output; the number of homes completed in the first quarter of 2025 left the Government more than 36,000 short of the required quarterly run rate.

Gareth Belsham, director of Bloom Building Consultancy, said the sector was seeing faster declines in residential construction output, adding: "Things have gone from bad to worse for housebuilders, with residential construction output falling at its fastest rate since February."

The S&P Global reading reflects weakened activity across the wider construction industry amid what economists and industry participants have described as a prolonged downturn. The eight-month stretch of falling output follows a period of post-pandemic volatility in supply chains, labour availability and costs that helped drive a cyclical slowdown in work on new homes.

Ministers have emphasised the 1.5 million homes commitment as a central element of the government's housing strategy. However, the combination of lower quarterly completion numbers and ongoing contraction in construction activity presents an immediate challenge to meeting the target on the present timetable.

Industry bodies have previously pointed to the need for sustained policy support, planning reform and measures to tackle costs and skills shortages if housebuilding is to accelerate. The latest survey and official completion figures will increase pressure on policymakers and developers to outline how the shortfall in delivery will be addressed in the remaining period before 2029.

The S&P Global data and the Government’s quarterly completions figures together underscore the gap between current output and the rate of construction required to meet the stated ambition, leaving ministers with a narrowing window to close the shortfall through increased starts, faster completions or changes to delivery mechanisms.