Planning changes: will they boost the construction industry?

The Government’s bid to kick-start the economy by proposing a year-long free-for-all in house and business extensions might not be such a panacea for the jobs market.

The controversial proposals double the area that homeowners and businesses can extend outside conservation areas. That means detached homeowners will be able to build a single storey up to eight metres into their gardens without planning permission, while owners of terraced houses can extend by six metres – so long as it’s not more than 50% of their garden. Business owners will be able to extend their shops by 100 sqm and industrial units by 200 sqm.

It’s all part of a package of initiatives aimed at boosting work for the flagging construction industry, which has seen 45,000 jobs go this year alone and a 10% fall in output since 2011, according to the Office of National Statistics (ONS). It makes up a significant proportion of the UK’s economy, about 8%, so its slump in the first part of 2012 coincided with a return to recession this year.

Construction boost

Without doubt, the construction industry needs help or more jobs will be lost. The idea, of course, is that by making it easier for people to extend or improve their homes, more builders, plasterers, electricians and others linked to the industry will find gainful employment.

But will it? There is a school of thought that it’s not the planning system that is holding back small projects in the first place. Every year, around 400,000 planning applications are processed, of which almost 200,000 are for residential improvements. Nearly 90% are approved and, of those that are rejected, it’s believed many go on to build smaller extensions under permitted development rules.

Certainly, there’s no evidence that many more homeowners would be encouraged to build if the laws are relaxed. And surely, in the chilly economic climate, it’s not so much the planning permission that is a hindrance, but rather the financing. Extensions cost at least £20,000 – not easy money to find in a world where loans are harder to get.

Indeed, Catriona Lingwood, chief executive at Constructing Excellence in the North East, says the number of domestic projects have fallen and have been doing so since the start of the recession in 2008. In her view, there are other ways to boost business: “The relaxing of planning regulations may have an impact, but not as much as it would if the Government were to look at the reduction of VAT on small projects, which I think would have a significant impact. This has been called for over some time but to no avail,” says Lingwood.

Too expensive to move

There are those who reckon the proposals could create work, however. They argue that the recession has trapped many growing families in smaller houses and the option to extend is a less costly solution that can add to the value of the house. For instance, in south west London estate agents reckon a £50,000 extension can add £100,000 to the value of the house.

Specialist lender Blemain Group claims that homeowners who are unable to move will take this opportunity to extend, and will simply turn to the specialist lending industry for a secured, commercial or even a bridging loan.

As sales and marketing director Gary Bailey, says: “The question is how will people fund these projects? With remortgages and business loans becoming increasingly difficult to secure, this might not be a workable option… property owners will need to consider alternative sources of funding.”

The bottom line is that there is not much cash around. ONS figures in July showed that disposable income per head in the previous three months had hit a nine-year low, falling by 1% on the previous quarter. On average, it is estimated we all have about £273 per week to dispose of. There’s also evidence that householders are using any money to pay off debts and mortgages.

This is backed up by economists. Howard Archer, chief UK and European economist for IHS Global Insight, told the Independent on 31 July 2012: “Consumers are likely to remain cautious and restrained in their spending for some time to come. This caution is likely to be reinforced by concerns over the economic outlook and jobs.”

If the proposals do go ahead, then, they might not stimulate business. Worse still, they could even trigger further job-losses. What, for example, will become of the planning departments across the UK’s town halls? According to Heather Wakefield, head of local government at trade union Unison, deregulation will almost certainly lead to job losses. She won’t speculate as to numbers, but adds that more than 200,000 town hall jobs have gone in the past two years, which is leading to concerns for the future.

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