Planning and Finance Slows SME Entrants into Construction
The construction sector saw a 4% increase in the number of SMEs from 2010, compared to a national average across all industries of 17%.
According to the latest study from specialist challenger bank, Hampshire Trust Bank, the research with the Centre for Economics and Business Research (CEBR), suggests the low levels of SME growth in construction may be due to the high number of barriers they have to overcome, such as planning costs and access to appropriate finance, which is contributing to the UK’s broken housing market.
Ste against this, with increased activity outside of London and the South East in cities such as Manchester, Birmingham and Bristol, smaller construction firms have opportunities for future growth. The study also identified that despite a lower percentage of smaller firms entering construction, the sector does have higher numbers of SMEs overall.
Financial concerns were frequently cited as another barrier to growth in the industry which may deter start-ups in the sectors, while almost a third (28%) of construction companies said competition in the market was the biggest barrier to growth.
While growth levels remain below other sectors, nearly half (49%) of SMEs in the construction market are optimistic about the long-term economic prospects for their sector and recent Markit data has shown there is more modest growth in the sector as a whole, which includes the smallest firms to larger housebuilders and contractors8.
Robert Grigg, Managing Director of Property Finance at Hampshire Trust Bank, said: “Our report identifies SMEs in the construction sector have grown at a slower rate than other industries over the last few years. Our team works specifically with SME housebuilders and with demand for housing continuing to outstrip supply, our customers are coming up against barriers to developing this vital housing stock. Issues such as planning costs and turnaround times results in an uphill battle for smaller property developers.
“We were pleased to see the government identify that SME housebuilders hold the key to fixing the UK’s broken housing market in the recent Housing White Paper and the latest Markit data indicates stronger growth in the sector.
“As we have identified, firms are finding new opportunities out of London and the South East in cities such as Manchester, Birmingham and Bristol and companies local to these regions should also start reaping the success of newly regenerated cities too. What is crucial is that the government focuses on how these SMEs can be more competitive quickly, to not only take a step towards boosting sector growth but help more people take their first steps onto the housing ladder.”