UK Construction Attracting Higher Levels Of Investment Than Any Other Sector
The UK construction sector is currently experiencing a significant boost in investment, driven by rising demand for housing and commercial properties. According to recent data from money.co.uk, substantial funding is flowing into various industries through Enterprise Investment Schemes (EIS) and Seed Enterprise Investment Schemes (SEIS)—government initiatives that encourage private investors to support UK businesses.
The research highlights the amount of investment received by each sector in 2022/2023 compared to 2020/2021, identifying which sectors are growing the fastest in terms of investment. Notably, the accommodation and food services, along with the construction industry, are leading the way.
In figures, accommodation and food businesses secured £47 million in investment last year, marking an 80.77% increase from 2020/2021. Meanwhile, the construction sector attracted £16 million through EIS and SEIS, reflecting a 77.78% rise.
This growth is largely attributed to the ongoing demand in the UK housing market, which continues to outpace supply. Additionally, past and present government housing targets have fueled further investment into the sector.
The report also points out that the increased investment may be partly influenced by rising costs of materials and labor, prompting construction firms to seek funding to support larger, high-profit projects that appeal to investors.
The Importance of Construction to the UK Economy
The construction industry’s expansion is driven by both public and private demand, and this trend is expected to continue, especially with Labour’s ambitious plans to build 1.5 million new homes over the next five years.
One key component of Labour’s strategy is the development of several new towns, similar to Milton Keynes and Welwyn Garden City, which will require further investment and activity within the construction sector.
The recent study indicates that not only has the volume of investment through EIS and SEIS funding increased, but the number of construction firms receiving this support has also risen by 42.9%. In 2022/2023, 50 companies benefited from this investment, up from 35 in 2020/2021, highlighting the sector's growing significance to the broader economy.
The report notes: “The construction sector is essential for building and maintaining the housing and infrastructure needed by other industries. Recently, a skills shortage in the sector has driven increased investment to boost productivity.”
Understanding the New Towns Initiative
Labour’s proposed plan to establish a new wave of towns aims to deliver hundreds of thousands of homes, along with the necessary infrastructure, amenities, and businesses to support these new communities.
New towns are seen as an effective way to accelerate housing development, as homes in these areas are typically constructed faster than in existing urban spaces. However, some critics argue that new towns alone may not be enough to meet the 1.5 million homes target.
In response, the focus may also shift towards expanding and enhancing existing urban areas, which could deliver a larger number of homes. Local authorities will receive new targets to help streamline the planning process and address backlogs.
Private sector investment is expected to play a significant role in funding the construction of these new towns, bolstered by potential government incentives. The government plans to establish a New Towns Commission within six months of taking office and identify suitable sites within a year, aiming to jumpstart this ambitious housing strategy.