'Failure to build enough houses and offices to meet demand is holding back growth'
The UK’s long term failure to build enough houses and offices to meet demand is holding back growth, a leading economist has warned.
Tom Pugh, chief economist at RSM UK, said he was concerned the Government’s actions with regards to the house building sector were not matching the rhetoric before they came to power. In an interview with The Yorkshire Post he highlighted fears about the rate of house building in London, adding: “That's a fundamental drag on the economy. This is about the longer term issues.
"It's very difficult to maintain productive growth if we can't build any more houses or infrastructure, whether that's new office blocks for professional services firms in an inner city or a life sciences lab in Oxford or Cambridge.
"Those types of issues have long term productivity implications,’’ he added. That's one of the fundamental factors for the productivity slowdown over the last 20 years. What's holding it back has much more to do with the regulatory side of things such as the planning system, than with a lack of demand for these things or an inability to finance them.” That's something the Government could address."
He continued: "Part of our fundamental problem, and this applies to numerous governments, is that we've simply been unable to acknowledge that trade-offs exist. We seem to have this idea that we can implement whatever policies we want and there are no downsides to anything.”
In January, The Centre for Policy Studies claimed that London housebuilding was facing its largest challenge since the Second World War. Every year since 1946, London has completed more than 10,000 homes, the centre’s report said. But given the low numbers for housing starts, the consultancy Molior predicts that only 4,550 homes a year will complete construction in both 2027 and 2028.
Figures released this week, after Mr Pugh made his comments, indicate that the number of new homes started in the third quarter of this year fell by 13 per cent compared with a year earlier. The National House Building Council said 26,231 new homes were registered in the third quarter of the year, down by 13 per cent compared with 30,279 in the third quarter of 2025.
Daniel Pearce, chief strategy officer at the NHBC, said demand remains fragile, affordability is stretched and the latest figures show that the pipeline of new homes is continuing to shrink.
A Ministry of Housing, Communities and Local Government spokesperson said: “Our bold planning reforms have already seen housing starts up 20 per cent compared to this time last year, with a 298 per cent increase in London alone.
“The new National Planning Policy Framework makes planning policy easier to use, delivering faster and simpler local plans and unlocking the growth and homes people need.”
A Government spokesman said it had kickstarted its £39bn Social and Affordable Homes Programme, the first wave of funding to support the delivery of more than 70,000 homes.
The statement added: “The new NPPF (National Planning Policy Framework) introduces clearer, more ‘rules based’ policies for decision-making and plan-making, designed to make planning policy easier to use and underpin the delivery of faster and simpler local plans. It also introduces a number of changes that are intended to unlock additional housing supply, facilitate economic growth and improve the approach to environmental protection and heritage assets.”