The third annual Lloyds Bank housebuilding report which surveys housebuilders and their supply chain, analyses the state of the industry today and the opportunities and challenges it faces in the future.

The sector is adopting modern methods of construction that hold the potential to boost productivity and supply. Firms reported that they are already investing in new building techniques, including modular housing (68%) and panelised systems (56%).

Housebuilders’ motivations to adopt these methods include improved efficiency, ease of build, better construction standards and in some areas increased margins.

As a result, firms’ investment in new building techniques has increased year on year from 20% of current annual turnover to 24% over five years.

Innovation is also supporting the delivery of sustainable homes with 82% of firms saying they are more focused on this issue than ever before.

An ongoing shortage of skilled workers continues to affect the sector with a third (31%) of firms saying there is a skills shortage at a national level. More than a quarter (29%) said they have trouble recruiting skilled workers in the regions where they operate.

The report also found that the UK’s exit from the EU was exacerbating the skills shortage, with half (50%) stating that it was making recruitment harder for specific roles while a quarter (26%) said that access to EU labour is a key challenge for their business.

On a positive note, the report found a sector tackling the skills shortage head on, as almost seven in ten firms (69%) of respondents are investing in staff training, and half (51%) are setting up apprenticeship programmes.

The research found that, in the face of ongoing uncertainty, optimism about the future of the housebuilding industry remains steady at 6.9 down from 7.2, with 10 representing the highest level of expectation.

Firms’ growth ambitions also remain strong with the sector anticipating growth of 29% of current business turnover over the next five years, up from 28% last year.

Housebuilders expected to invest 31% of their current annual turnover back into their business over the next five years, still historically high but down slightly from 35% in the last report.

Firms said they plan to create more than 139,000 new jobs in the next five years, which equates to more than 40,000 fewer jobs in the pipeline than there were a year ago.

David Cleary, regional director and national head of housebuilding, Lloyds Bank Commercial Banking, said: “The housebuilding industry remains upbeat despite issues that have weighed down the sector for some time including Brexit uncertainty which is contributing to a skills shortage and inflating the cost of raw materials.

“It is reassuring to see the sector confronting these challenges head on by investing and planning for business growth, prioritising staff training and looking at more innovative new building techniques. This has the potential to boost productivity and, more importantly, increase the pipeline of new homes that the nation badly needs.

“We fully back the sector in this ambition both by providing funding solutions and banking services and, through our Housing Growth Partnership to increase the number of new homes built in the UK. By sharing the insight in this report we hope to inform decisions at a time when the industry faces challenges, but also great opportunities.”

Stewart Baseley, executive chairman of the Home Builders Federation, said: “Whilst output is up an unprecedented 74% in the past four years, the industry faces some huge challenges as it strives to meet the housing needs of the country. Housebuilders are investing significantly to address these challenges and ensure the industry has the capacity and skills to deliver even more, high quality homes. Lloyds’ report provides a detailed insight into the current climate within which the industry is operating and the steps being taken to ensure companies can deliver.”