Business development · 20 September 2016

Planning process shuts out small firms as space to build runs low

67 per cent of small firms felt that a lack of available land was the main problem facing their business.

Finding space to build new homes remains the primary concern for small building firms, a new survey has shown.

According to the Federation of Master Builders (FMB) survey, 67 per cent of small to medium house builders in England felt that a “lack of available and viable land” was the main problem facing their business.

The survey also found that 50 per cent of SME building companies across the UK struggled to access the relevant finance to begin new housing projects, and felt the planning system to be a closed-shop for small firms.

In a statement, FMB chief executive Brian Berry highlighted the stronger role that local councils need to play in creating a fair and competitive planning process that opens the door to smaller firms.

“Councils need to find a way of allocating and granting planning permission for more small sites. The current focus on large sites is squeezing out smaller developers, which is reducing competition in the housing market at a time when we need more, not less, choice,” Berry said.

Pushing for a stronger relationship with small businesses, Berry urged council planning departments “to be adequately resourced so that they have the capacity to engage more closely with SME house builders”.

Small building firms will be eagerly awaiting the chancellor’s Autumn Statement in November, as chancellor Philip Hammond is expected to announce a housing fund targeted towards smaller developers. The government will offer loans at low rates from a £3bn house building fund in an attempt to reach its target of new homes.

While the government announced a “Cutting Red Tape” review in December 2015 – a series of measures that sought to remove the bureaucratic burden of small construction firms – Berry suggested that this is yet to be felt by the industry.

“It would appear that its reforms have yet to make a difference,” he said, as firms continue to experience a decline in activity as a result of the EU referendum.

Recent figures from the Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) showed the contraction rate for housing activity at its slowest for three months, indicating a direct impact on smaller firms.

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Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.