Planning progress reveals the scale of challenge ahead
Making sense of the latest trends in property and economics from around the globe
4 minutes to read
Homebuilders have long viewed the UK's dysfunctional planning system as one of, if not the biggest barrier to meeting demand.
While that remains the case, sensible policies introduced last year are beginning to feed through; 61% of housebuilders now pick planning as the most significant barrier to delivery, the lowest proportion since we began the survey in 2021 and down from more than 80% in previous quarters.
The results, from Knight Frank's latest quarterly survey of more than 50 volume and SME developers, suggest ministers are heading in the right direction – but also underscore just how much work remains. Housebuilders have grown more confident following the reintroduction of mandatory housing targets and commitments to greenbelt flexibility - these will all drive output among the volume players in the regions - but urban delivery remains beset by risks and will require the attention of policymakers. Gateway 2, building safety regulations and the complexity of Section 106 requirements are all weighing on output.
You can read a snapshot of the survey over at Bloomberg this morning and we'll share more details soon.
Infrastructure strain
The government has made progress on major infrastructure projects, too, though each success often highlights the depth of the systemic issues and the scale of what still needs to be addressed.
Incredible figures obtained by the FT reveal that more than one-third of the £1.2bn spent on the proposed Lower Thames Crossing has gone towards planning applications, for example. Documents spanning traffic modelling, plus economic and environmental impact assessments run to more than 350,000 pages.
These methods pre-date the Planning and Infrastructure Bill, which does include measures designed to prevent such costly missteps. Cutting the number of bureaucrats that need to be consulted at pre-application stage and limiting opportunities for judicial review will help, but the FT reporting hints at the bloated nature of the project. It's a National Highways project, managed by the arms length, 150-strong Lower Thames Crossing team, which itself is serviced by consultants from as many as seven other firms. The public accounts committee was scathing about similar structures employed on HS2.
Planning consumes so much energy and resource that it's easy to forget the economic challenges that housebuilders and other developers face. Half of the respondents to our survey said labor shortages have affected their ability to meet housing targets over the past year. Bricklayers were cited as the most in-demand trade - Home Builders Federation estimates put the shortage at about 20,000 if output is to meet 300,000 additional homes a year.
Muted momentum
The UK isn’t directly caught in the crosshairs of the latest round of US tariffs, but there will be knock-on effects. The IMF this week cut its forecast for UK growth in 2025 to 1.1%, down from 1.6% in January. It also trimmed the 2026 projection to 1.4%. That puts the UK broadly in line with other advanced economies, where elevated interest rates and an uptick in protectionism are already starting to bite.
There are aspects of these forecasts that should be taken with a pinch of salt. Nobody really knows what the global trade policy landscape will look like just weeks from now, never mind months. Yesterday, both Treasury Secretary Scott Bessent and President Trump himself suggested a trade deal with China could be close. Nevertheless, UK growth will be hampered by slow domestic consumption, the developed world's highest energy costs and the long term effects of the recent surge in inflation. Rising gilt yields may also coax the Treasury into raising taxes.
Still, the Fund sees scope for the Bank of England to cut rates again this year – three times, on top of February’s quarter-point reduction, according to chief economist Pierre-Olivier Gourinchas. While inflation is set to rise slightly this year, from 2.5% to 3.1%, the IMF agrees with the Bank of England that the uptick will prove transitory and shouldn’t derail the path to policy easing.
Global drift
The IMF now expects global GDP growth to slow to 2.8% in 2025, before recovering slightly to 3.0% in 2026. The Fund’s five-year-ahead forecast is now at its lowest level in decades.
Again, this is about more than tariffs. A combination of ageing populations, sluggish productivity growth, and increasingly fragmented trade relationships are all contributing to what the IMF calls a loss of economic dynamism. Policymakers are also grappling with the hangover from the inflation shock – even as headline rates fall, high debt levels and tight financial conditions continue to bite.
The Fund sees inflation returning to 4.3% globally in 2025, down from 6.8% last year, and expects further easing as energy prices stabilise. That should give central banks room to loosen policy, but the path will be uneven and the risks remain tilted to the downside – especially if new supply shocks emerge.
In other news...
Canada’s Prime Minister pushes country to become the housing factory of the world (Bloomberg), and finally, office workers back as vacancy rate falls for first time since 2020 (Times).