Britain's economic growth forecast may be downgraded by the Office for Budget Responsibility (OBR) as the government struggles to meet its housing construction targets, an expert has claimed. The OBR is said to be considering adjustments to figures provided to the Chancellor ahead of the upcoming Budget due to the slow pace of new home building.
Housing Secretary Angela Rayner has acknowledged that there is only a 'slim chance' of meeting the government's target to build 1.5 million homes by the next election. Official estimates indicate that in the first two years of Labour's administration, 392,400 new homes were built, falling short of the required rate by more than a third.
The OBR had previously estimated that achieving the 1.5 million home target would boost the UK's Gross Domestic Product (GDP) by 0.2 percent. However, housing expert Neal Hudson told the i Paper that he met with OBR officials who were examining reductions to this projected economic impact, suggesting the original forecast might have been overly optimistic given the pace of construction.
A downgrade in the UK's growth forecast could lead to increased government borrowing. This, in turn, might contribute to higher mortgage rates for homeowners, potentially further dampening the housing market.
Rayner stated in a recent BBC interview that while she would not abandon the 1.5 million home target, international 'headwinds' such as rising building costs and the impact of global conflicts have made it more challenging. She described the target as always being a 'stretch target'.
In an effort to accelerate construction, the government recently published measures to streamline housebuilding in England, including default approval for homes built near well-connected train stations. Additionally, former Mayor of Greater Manchester Andy Burnham announced a £10 billion investment for social and affordable homes across England, though this has led to accusations of diluting previous commitments.
The GMB union has also raised concerns, warning that 500 million bricks are currently unused in depots nationwide, potentially hindering the government's house-building objectives. The union noted that brick manufacturers are facing closures or production mothballing, which could lead to job losses.
A spokesperson for the Ministry of Housing, Communities and Local Government expressed the department's commitment to the 1.5 million home target, citing a 15 percent increase in housing starts as evidence of progress from planning reforms. The spokesperson acknowledged the challenges posed by construction costs and macroeconomic factors.
The OBR has declined to comment on the matter ahead of its economic and fiscal outlook presentation, scheduled to coincide with the Budget on October 28.