Small builders face serious barriers to growth

Published:  09 October, 2014

Small housebuilders and developers in the UK face serious barriers to growth with planning, access to finance and land availability highlighted as the biggest challenges for small companies.

Research by the National House-Building Council (NHBC) Foundation, published today (9 October), shows that there has been a significant decline in the number of small firms active in house building in recent years – halving between 2007 and 2013, with only 2,710 estimated to have been building last year.

The report ‘Improving the prospects for small house builders and developers’ explored the business environment that small firms are experiencing and, supported by the HBF, the HBA and the FMB, captured the views of nearly 500 small housebuilders and developers. It found that despite encouraging signs of house building growth in the UK, the early stages of the recovery do not appear to have improved prospects for smaller builders.

The main findings are:

  • Planning – One third said that the planning application process and conditions attached to planning represented a major challenge to their business
  • Finance – Securing suitable finance for projects was identified as a major challenge for nearly a quarter (22%) of smaller companies
  • Land availability – The availability of land at a suitable price was seen as a major challenge by 14% of the small companies
  • Skills – Nearly three quarters (74%) felt that there would be insufficient good quality subcontractors and trades to meet the needs of a growth market over the next two to three years.

The report contains a number of recommendations to address these barriers and help small housebuilders to prosper and grow. These include:

  • Planning – Speed up decision making on planning decisions and planning conditions and improve communication
  • Finance – Promote the Builders Finance Fund for smaller builders (government initiative announced in the spring Budget). Banks should offer more flexible funding arrangements and conditions to reflect the cash flow challenges of developing a site
  • Land availability – Make information on land availability more accessible, particularly for underused/surplus public assets and ‘brownfield’ opportunities. Increase, where possible, the availability of small standalone plots. Offer some parcels of land, typically for one to 10 homes on larger development sites.

Neil Smith, head of research and innovation, NHBC, said: “Small housebuilders and developers have made a significant contribution to the UK’s housing output over the years.

“Our research has found that the current business environment is not conducive to growth for small builders and developers. There are a number of factors at play, related in particular to the planning system, access to finance, land availability and a shortage of skills.

“For small companies, who often have limited financial resources or reserves, small differences in the way lending is structured and delays related to planning applications (among other factors) can be critical and make all the difference to the long-term viability of their business.

“The UK is still building way below the number of homes we need. We must make it a priority to address these barriers if small housebuilders and developers are to prosper and make a greater contribution to the housing-market recovery.”

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