One year of Labour: an economic snapshot

July marks 12 months since Labour’s rise to power after 14 years in opposition. Its manifesto made big promises, chiefly to crank up economic growth by investing in infrastructure, or as the party coined it, ‘getting Britain building again’.

Labour’s mission was to reintroduce stability, drive development and seemingly, as the soon-to-be Secretary of State for Health and Social Care, Wes Streeting, said on the NHS last May, “under-promise with the aim of over-delivering” ⁽¹⁾.

However, despite the government’s best intentions, progress has been slow and underlined by a long wait for phase two of the Spending Review. So, what has Labour achieved for construction’s economy to date, and what must the non-negotiables be moving forward?

BCIS’s chief economist, Dr David Crosthwaite, reflects on Labour’s first year in power and answers key questions on its economic impact.

Housebuilding. Was the 1.5 million homes target doomed from day one?

Labour’s housebuilding target was aspirational at best. Trying to build 1.5 million new homes over 5 years was simply never going to happen. You only needed to look at new housing completions data over the last 50 years to realise that the target was not achievable.

The government doesn’t control the supply of housing. That’s down to the housebuilders. They’re looking to maximise profit, which means they very carefully control the supply of new homes to maintain price levels.

The long-term average for new house completions is around 240,000 per year, so based on that, it’s likely the government will fall short of its target by about 300,000 homes.

From the outset, the party’s messaging was too ambitious and too quick to name and shame the economic situation it inherited. Markets and investors desire stability and confidence above all else. It was poor judgment to publicly disparage the economy in the first few months of coming to power.

In doing so, Labour helped to deter private sector investment. Construction is a response to levels of investment so undermining the economy has contributed to the stagnated industry and slow housebuilding progress we’re seeing now.

What about taxation? Did Labour choose the right path?  

In my opinion, Labour backed itself into a corner by refusing to increase the taxation of workers in its manifesto. This went against Labour’s historical aims on personal taxation and left them little choice but to tax businesses.

This has had huge effects already. ONS data showed that UK unemployment reached its highest rate in almost four years in the first quarter of 2025⁽²⁾. When the cost of employment goes up, businesses rein in investment and they’re also more likely to shed employees.

This was not good news for construction. Coupled with the recent tightening of immigration rules, hiked business taxes threaten the direct employment of the industry’s workforce.

How can Labour begin to remedy construction’s economy?

The Chancellor’s fiscal rules don’t give much headroom for borrowing. We’re now seeing a focus on attracting private sector investment to fund the government’s development ambitions.

We’ve had significant capital spending confirmed for housing and infrastructure in the Spending Review and 10 Year Infrastructure Strategy, but what’s desperately needed is a clear outline of project timelines and proposed funding mechanisms which will hopefully be included in NISTA’s commitment to an ‘investor-focused’ pipeline. This, with a more stable wider economic environment, should spur the private sector to invest.

The original project pipeline was created to provide certainty of demand and improve government procurement during a period of capacity constraint. Historically, there were too many projects and not enough businesses bidding for them.

However, the pipeline’s purpose remains the same – to enable businesses to plan for upcoming demand by ensuring adequate resources are available, and to limit the impact of capacity pinch points.

What next?

The government has had a difficult first year. Some of the challenges faced have been external, but some have been of its own making. If the government is serious about “getting Britain building again” then it must release the project pipeline and provide more clarity on private funding models.

That said, stagflation is often the lot of advanced economies – take the lost decade in Japan as an example. However, with a commitment to innovation and investment, it’s possible to break the cycle and move towards economic stability and even robust growth.

Promisingly, Labour has committed to delivering built assets and looking at ways to do that through its infrastructure and industrial strategies. If the government can pull these plans off, it still stands a shot at economic growth. But it is a very big if.

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One year of Labour

More commentary on the government’s first year in power:

One year of Labour: housing figures show work to do

One year of Labour: BCIS chief economist says government is ‘turning a corner’

One year of Labour: an infrastructure snapshot

One year of Labour: a carbon snapshot

^{(1) 4 News – NHS going through ‘worst crisis in its history,’ says Wes Streeting – here}

^{(2) Office for National Statistics – Unemployment rate (aged 16 and over, seasonally adjusted): % – here}