Labour’s ambitious plans for a decade of national renewal rest on a rather narrow foundation. They have promised to accelerate our faltering economy and rebuild our crumbling public realm over the next decade.
However, this spending review puts that decade on a narrow track. If you were hoping that Labour would start with a grand wave of public service improvements to fix Britain’s fiscal woes, the spending review ended that hope.
Day-to-day departmental spending is projected to climb by a mere 1.2% per year in real terms between 2025–26 and 2028–29 – the lowest rate for any post-austerity government. More than half of this modest increase is already earmarked for the NHS, with defence absorbing much of the rest. Not exactly a spending spree, and leaving precious few levers for genuine economic uplift.
Enter capital investment, the government’s chosen workhorse. Labour is leaning heavily into this, with capital spending set to grow a more robust 1.8% annually between 2025–26 and 2029–30.
In practice, this means a public pipeline (as seen in the ten-year infrastructure strategy), covering everything from rail to energy, housing, and digital infrastructure, is expected to surge past £700 billion. That’s a significant commitment, and it hinges on one critical, often overlooked, factor.
The Construction Conundrum: Productivity and the Planning Hurdle
The key axle around which Labour’s growth plans rest is planning. The Office for Budget Responsibility (OBR) identifies planning reform as the single largest structural growth catalyst in the government’s model. But, rather disappointingly for Labour’s fiscal plans, they only estimate an increase of 0.2% GDP uplift by 2030.Why so little growth? Because their modelling accounts for “displacement effects,” where construction activity might crowd out other economic activity. In the chart above, you can see that the OBR believes planning will lead to us spending less, trading less, and investing less in other things.
But the bar that really matters is the little green one. For Britain to truly thrive from this investment, the construction sector needs to become significantly more productive, and fast.
UK construction productivity has barely budged in decades. Since the year 2000, sector-wide productivity has crawled up by just 0.4% per year. Contrast that with manufacturing, which managed around 2% annually over the same period.
We are also a global outlier. After the pandemic slump, France has boosted construction productivity by a notable 25% and Germany by nearly 40% in that timeframe. The UK, meanwhile, only advanced by about 7%. We’re not exactly leading the pack.
This sluggishness comes with a hefty price tag. A productive construction sector means we can build things quickly and cheaply. Solving this is what the Government needs to aim at squarely.
The Construction Conundrum: How Planning Reform Can Unblock Productivity
The UK construction sector is stuck in a deep productivity rut, directly hampered by its planning system. Projects face crippling delays; Nationally Significant Infrastructure Projects, for instance, now take an average of 4.2 years to gain approval. This bureaucratic drag adds immense cost and prevents vital infrastructure from being built efficiently.
Consider the HS2 Northern leg. Its recent cancellation, despite years of planning and significant investment, vividly illustrates what happens when strategic vision falters and a clear pipeline of work evaporates. The original full HS2 project was initially estimated at £37.5 billion in 2009 prices. Now, even the truncated Phase 1 alone (London to West Midlands) is estimated between £54 billion and £66 billion. This astronomical cost escalation and the ultimate axing of a major component are emblematic of the productivity drain caused by an unpredictable, fragmented planning system and a lack of long-term commitment.
So, how exactly does planning reform fix our construction productivity woes?
It’s all about cutting the nonsense that drains time and money. In practice, it means an actually listed out pipeline so builders know roughly how many workers they might need. It means fewer baffling forms, fewer endless, costly consultations. That means fewer consultants charging exorbitant rates for paper-shuffling purgatory. It means clarity in the supply chain so that you can buy materials at a lower cost and get them to site efficiently. It also means faster approvals, so the actual economic activity of building stuff gets going quickly and has a ripple effect. But the big win is that when developers aren’t in constant limbo, unsure if they are coming or going in a sector with minuscule margins, there’s a proper reason to invest in clever tech that speeds up on-site processes, knowing their cash flow won’t vanish into thin air.
This isn’t just theory; it’s about making planning less of a bottleneck and more of a predictable pipeline, driving efficiency from the drawing board to the digger.
Ultimately, Labour’s grand vision for a “decade of national renewal” boils down to a significant wager on planning reform. It’s a high-stakes bet that fixing the drawing board will finally get spades in the ground, rapidly and efficiently. Without planning reform that actively slices through bureaucracy, speeds up approvals, and fosters a clear, consistent pipeline, that impressive £700 billion capital investment risks getting swallowed by delays and inefficiencies.
The success of this ambitious growth strategy isn’t just about big numbers on a spreadsheet; it’s about whether Britain can truly build its way to prosperity. Find out more about our work on infrastructure
