Why SMEs could now help the housing crisis
Last month the government launched a much anticipated white paper which aimed to tackle the country’s housing crisis head on. And one of the most promising things to come out of it was the £3bn Home Building Fund which would largely help small independent building firms play their part in resolving the issues.
According to a report by the Home Builders Federation (HBF), the number of small and medium-sized enterprises (SME) has reduced by a huge 80% in construction over the last 25 years, leaving the market dominated by the major building firms. And, with the UK housing crisis still crying out for new homes, an attempt to change this can only be a good step forward in helping them do more.
But, with overall housing supply increasing massively over the last three years anyway, thanks to the big national firms, why is it so important that SMEs get back in the game? And the answer lies with their effect on local communities and economies.
The role that SMEs have to play in construction
When the HBF report was released, Stewart Baseley, Executive Chairman of the Home Builders Federation, said: “If 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.”
And that’s the point. The masses of benefits that SMEs can give to local communities and economies, by employing local suppliers, labourers and other people related to the project who all come from nearby. Also, by smaller companies putting more focus on training and recruiting extra people in the construction industry, it can only add to an industry which supports more than 700,000 jobs over all.
Of course, knowledge of the local area also means individual, attractive and well-designed projects which can be supported by the schools, hospitals, roads and other services nearby, as opposed to something that is created to be the same everywhere you go.
There’s a reason why communities have local planning systems of their own and that’s because each community has different needs and aspirations.
Could Brexit be useful for construction?
Despite bank lending increasing to SMEs since 2008, it has not been enough to allow smaller companies the ability to wade through the lengthy knots of red tape imposed by the EU. (This has also suggested a potentially positive outcome from Brexit, where these sort of restrictions will no longer be in place).
It was felt that removal of such barriers could enable SMEs to build a further 25,000 homes per year. And it could reverse a trend where (as chairman of Redrow Steve Morgan said) growing from a fledgling builder to a national company would be ‘almost inconceivable’.
What the government can do to help
In addition to reforming EU regulations post Brexit, the report also suggested further steps which would help SMEs come to life and play their vital part once more within the construction industry.
These included the suggestion of a new Help to Build scheme to help extend sustainable lending to smaller companies and tackling specific planning problems that affect SMEs.
The government could also help by offering incentives such as tax relief or tax breaks. They could offer access to the planning experts several times a year, as SMEs do not have their own Planning Managers in-house like larger companies. This could help them gather knowledge around planning issues which would enable them to gain consent much quicker with no need for a re-submission.
Chief Executive of the Federation of Master Builders Brian Berry said: “SMEs certainly have a major role to play in the delivery of new homes. Giving more support to smaller housebuilders will help deliver more homes more quickly. Delivering more homes on small sites doesn’t just provide opportunities for SME builders but on average delivers homes more quickly than on large sites”.
Let’s not forget that it’s all hands on deck where it comes to solving the chronic housing crisis that we are currently facing in the UK. And, despite their size, there’s no way that the larger building firms could or should be relied on to solve the crisis single handedly.
If supply and demand is to meet in the middle, then giving the power back to SMEs can only help the construction industry succeed even further, creating more jobs and enabling local economies and communities the chance to thrive.