Angela Rayner’s resignation has left Britain’s housing ambitions at a crossroads. Her successor, Steve Reed, inherits a sector already in steep decline and faces an urgent choice: change course, or risk Labour’s central pledge of 1.5 million new homes slipping out of reach before the first brick is laid.
The urgency could not be clearer. The latest S&P construction figures show activity has now been in decline for eight consecutive months – the longest downturn in more than five years. For a sector so integral to growth – housebuilding and national infrastructure – this collapse in confidence is the starkest warning yet that government-induced cost pressures are driving firms to breaking point.
At the heart of the problem is the reality that 81% of construction companies are family-run SMEs. These businesses are the lifeblood of our sector, embedded in communities across Britain, yet they lack the financial insulation of larger, multinational players. When policy piles on cost after cost, it is these SMEs that feel the sharpest pain.
Today, they are contending with a perfect storm. Employer National Insurance rises have increased the cost of keeping people in work. Energy bills remain stubbornly high, squeezing everything from brick manufacturing to the running of machinery. Build costs have spiralled, not least as new regulations such as the Future Homes Standard add complexity and expense. Now, reforms to Business Property Relief threaten to hammer family firms further, making it harder to pass on businesses to the next generation without punitive tax bills.
These are the firms that invest in apprenticeships, sponsor local clubs and take pride in building not just projects but communities. They are also planning for tomorrow: reinvesting profits into new equipment, greener technology, and the skills needed to meet Britain’s housing and infrastructure demands. Punishing them risks breaking that cycle of renewal and weakening the very foundations on which future growth depends.
This is not an abstract concern. Insolvency figures from the Building Cost Information Service already show construction accountied for more than 16.3% of all business failures in the second financial quarter of 2025 – the highest of any sector. That trend will only worsen if Labour presses ahead with further tax rises in the Budget.
The consequences go well beyond company balance sheets. If SMEs collapse, it means fewer projects breaking ground, fewer jobs created and slower delivery of the 1.5 million homes Labour promised in last year’s general election campaign. It also undermines the infrastructure required to power growth, from new housing to roads, rail and utilities. Britain cannot build a modern economy on the back of a weakened construction base.
The contradiction at the heart of the Government’s policy is stark. On the one hand, ministers rightly call on construction to drive economic recovery, underpin housebuilding and deliver on Net Zero targets. On the other, they are eroding the very foundations of the sector by layering on tax and regulatory changes that make investment and growth harder, not easier.
We need to turn this logic on its head. Construction should be treated as an engine of growth – a partner to government in delivering national priorities. That means recognising family-run SMEs are not just contractors at the margins, but the backbone of the sector. Without them, the machinery of housebuilding, infrastructure renewal and energy transition grinds to a halt.
What should change in the Budget? Above all, the Government must rethink its approach to Business Property Relief. For family-run firms, the prospect of punitive inheritance tax bills discourages succession planning and threatens the long-term survival of businesses built up over generations. Undermining that stability would be a huge mistake.
The choice is clear. Labour can either create the conditions for family-run firms to thrive – supporting jobs, investment, and the delivery of 1.5 million homes – or it can carry on with policies that risk tipping many over the edge. The longer construction remains in decline, the harder it will be to restart the engine.
Britain’s ability to build depends on the survival and success of its SMEs. The Budget is Labour’s chance to show it understands that. It must decide whether to back the builders and their supply chains, or preside over decline.
