Some 96 per cent of UK construction companies are small building firms
David Cameron has unveiled plans to commission more than 10, 000 new homes from smaller house-builders on publicly owned land.
The policy has been designed to increase the amount of affordable housing in the UK, as well as to reduce the dominance of large construction firms, which are currently responsible for more than 50 per cent of the homes built in the UK each year.
Around one fifth of all UK SMEs operate in the construction industry, according to the Department for Business, Innovation & Skills (BIS) while some 96 per cent of UK building firms are micro businesses.
But there has been a decline in the numbers of small building companies over the last two decades and the proportion of new homes built by small firms fell from two-thirds in the late 1980s to 27 per cent in 2015.
The Federation of Master Builders (FMB) welcomed the plans. Chief executive Brian Berry told the Financial Times: When it comes to building new homes, the availability of small sites is the single biggest barrier to SME house-builders increasing their output.
it is also encouraging that the majority of these sites will already have planning permission in place as obtaining permission is all too often a protracted process, he added.
But research by the FMB in 2015 revealed that accessing finance was also a significant barrier to the growth prospects of small construction firms. The majority served predominantly as contractors for larger construction firms, and almost 80 per cent of the owners of these small builders stated that access to funding prevented them developing sites themselves.
The construction industry also has one of the biggest problems with unpaid invoices, according to additional data published in 2015 by the Asset Based Finance Association. The study revealed that small construction firms were owed 7bn, equivalent to 16 per cent of annual turnover.
The prime minister’s recent announcement follows the launch of the Housing Growth Partnership in July 2015 to invest in sites being developed by smaller builders.
access to finance is one of the biggest challenges smaller builders face, said housing minister Brandon Lewis. This 100m commitment will help our smaller builders fund new projects, expand their businesses, create more jobs and build more homes, he added.
