The Cost of Living Crisis and its Effect on Rural Wales

CIOB recently submitted evidence to the Senedd’s Economy, Trade, and Rural Affairs Committee Inquiry on the cost of living. The Inquiry, which closed on 16 May, asked questions about how current economic pressures are affecting trade and businesses in Wales, and the wider effect on rural areas. 

Effect of the crisis on the construction sector

In our evidence, we raised concerns that that current cost of living crisis will have a negative effect on the construction industry. 

Our Real Face of Construction 2020 report highlights the slow growth of the sector in Wales compared to the rest of the UK, and how the sector largely reflects the general condition of the economy. With current inflation pressures and continually rising material costs, the sector faces even greater pressure. It is likely that these increased costs are either being passed onto clients or absorbed by the construction business, both of which are unsustainable practices in the long run and could lead to delayed or cancelled projects as well as wide-ranging repercussions on the workforce.

This pressure is also affecting recruitment in the sector at a time when new staff are sorely needed. The CITB’s Building Skills for Net Zero in Wales report estimates that around 12,000 new recruits will be needed in Wales by 2028, largely to deal with retrofit programmes. A well-staffed and knowledgeable construction industry will be integral to the success of the Welsh Government’s net zero agenda and future retrofit schemes. 

To ensure the integrity of the construction industry, Welsh Government must collaborate with us and partner organisations to foster an educational system that can help inspire and attract talent to the sector while being informed by employers to prioritise gaps that need filling. 

Decarbonisation of Rural Areas 

We also raised concerns on the effects the crisis may have on wider decarbonisation and retrofit schemes such as the Boiler Upgrade Scheme (BUS), and subsequently on rural domestic efficiency. 

Rural areas in Wales face unique pressures and need to be treated differently to urban areas. Wales already has the oldest housing stock in the UK, and rural areas typically have more older houses than urban areas. This is a contributing factor to a greater incidence of fuel poverty in rural areas. 

This is compounded with rising inflation and skyrocketing energy bills. 19 per cent of rural properties in Wales are not connected to the gas grid, and as such these households rely on unregulated heating fuel to stay warm, such as oil and Liquid Petroleum Gas (LPG), the cost of which is directly subject to market volatility.

As a result, rural properties are often more difficult and costly to retrofit. While grants are available to decarbonise heating systems on the BUS, many rural households may be forced to spend thousands more than the grants on offer to access the full benefits. 

This means that not only are many rural households paying out of pocket to stay warm, many of them are also unlikely to be able to afford additional costs to decarbonise and retrofit their homes, unable to access energy and financial savings that these schemes would afford. 

Alongside aforementioned heating fuel prices and inflation, many rural households will be unable to afford the scheme, exacerbating the existing rural/urban divide. Rural areas will be considered more difficult to decarbonise and continue to be left by the wayside unless access to these kinds of schemes is made available. 

Failure to offer greater financial incentives now will also mean that the interventions to retrofit rural properties in the future will be more cost, time, and resource intensive, at a time when the construction sector is likely to be facing unprecedented demand for highly-skilled roles to tackle the Optimised Retrofit Programme (ORP) and other decarbonisation schemes. 

While the ORP accepts that a one-size-fits-all approach to decarbonisation is not feasible and aims to provide tailored solutions to all properties, this programme is currently limited to social housing. In the meantime, we would like to see greater financial incentives and schemes catered to rural areas, giving these households access to long-term solutions away from expensive heating fuels.

The Well-being of Future Generations (Wales) Act 2015

Our response outlined concerns with rural/urban divides. Rising energy costs are, of course, not unique to rural areas and many in urban areas may similarly struggle to afford additional costs where the BUS is insufficient. The costs associated with decarbonising rural properties are likely to be higher, however, due to a lack of connection to the gas grid and older properties. Failure to decarbonise rural areas and ensure equitable access to retrofit schemes is directly at odds with Welsh Government’s Well-being of Future Generations Act.

The Act puts seven well-being goals in place, which public bodies and any proposed legislation must work to achieve. Points we raised in our evidence can have direct, positive effects on socio-economic wellbeing and at least three goals in the Act, including: 

A prosperous Wales:

• This goal accounts for skills and low-carbon society. 
• Ensuring that housing in Wales is decarbonised and households have access to more environmentally sustainable heating technology – especially in rural areas where oil and solid fuel are more common – will help realise Wales’s net zero targets. Welsh housing accounts for 21 per cent of Wales’s total carbon emissions. 
• A flourishing construction industry will also provide well-paid jobs and attract new entrants to the industry, ensuring the industry has the sufficient staffing levels to dedicate to the ORP and other decarbonisation schemes. Doing so will also provide lifelong careers for many in Wales. 

A more equal Wales:

• As well as creating jobs and training for many in Wales, ensuring rural households can retrofit their properties without barriers, financial or otherwise, will ensure that households in these areas can access long-term financial and energy savings. 

A globally responsible Wales: 

• We have already outlined the benefits that decarbonising rural housing would provide to the environment. CIOB also has a role to play alongside Welsh Government to ensure that supply chains and practices in the industry are as sustainable as possible. 

We will keep monitoring the cost of living crisis and its effect on the built environment as well as this Committee inquiry. Should you require any further information, please contact [email protected].