Numerous and varied barriers, including finance, planning and red tape are preventing smaller firms from playing a bigger part in tackling the housing crisis in the UK, according to a new report from the Home Builders Federation.
Over the past 25 years the number of SME builders has reduced by around 80%, but just getting back to the number operating in 2007 could produce an additional 25,000 homes a year says the report.
Smaller builders were able to set up and grow quickly to establish themselves as significant contributors to local economies in the 1960s and 1970 so that by 1988 more than 12,000 were building new homes.
Today however the number of SME builders has dwindled with very few new entrants able to secure a foothold and even many established businesses unable to grow, the report reveals.
The report’s foreword, written by Redrow founder Steve Morgan explains how he grew his fledgling business into a national publicly listed builder something he says “would be almost inconceivable today”.
The barriers facing SME builders today are led by lack of access to finance and an increasingly complex planning and regulatory systems which are inhibiting the entrepreneurialism of smaller companies, the report says.
Even as banks have increased lending to SMEs generally, the report reveals that the situation has improved little since the recovery from the 2008 financial crash whilst the risky and expensive process required to achieve planning permission has thwarted SMEs without the infrastructure and financial ability to navigate them.
Whilst housing supply has increased significantly in the past three years such that it is now reaching the government’s target of 200,000 new homes a year, the vast majority of this increase has come from the largest builders. With government keen to see numbers continuing to increase, enabling SMEs to increase output will be key, the report point out.
The report suggests a number of steps government could take to help including the creation of a new Help to Build scheme to help extend sustainable lending to smaller companies and lifting barriers for builders to access tax incentives and other support enjoyed by SMEs on other industries.
It also says that tackling specific planning problems that disproportionately affect the business environment for SMEs, including the lack of smaller sites and the impact of pre-commencement conditions would help.
In addition, providing technical and planning advice services for fledgling businesses is needed and the government is urges to seize the opportunity of Brexit to reform European Union regulation to reduce the complexity associated with building new homes.
Stewart Baseley, HBF executive chairman, said: “Whilst housing output has increased significantly in recent years, the vast majority of the increases have come from larger companies. The number of smaller builders has collapsed over recent decades with few new entrants to the market able to grow to any size.
“If the government wants to see continued increases in supply it is imperative it enables SME builders to play their part. Removing the barriers for SME builders could result in tens of thousands of desperately needed additional homes being built and boost economies up and down the country.”
The HBF’s member firms account for some 80% of all new homes built in England and Wales in any one year, and include companies of all sizes, ranging from multi-national, household names through regionally based businesses to small local companies.