14 Mar 2017

80% of SME builders have left the market in last 30 years

80% of SME builders have left the market in last 30 years

Four out of five SME housebuilders have gone out of business in the last 30 years, found research by online property finance marketplace company LendInvest . The number has dropped from 12,200 companies in 1988 at the end of the last housing boom, to 5,700 in 2006, and 2,400 in 2014.

LendInvest published Starting Small to Build More Homes: a blueprint for better policymaking in the property SME market, bringing together industry evidence to examine the cause and effect of the decline in SMEs, and their role in the housing crisis. These include contraints with regards to finance compounded by distorted regulation, taxation and land access policies.

The report also examines the social and economic contributions SMEs make locally and nationally, and advocates more robust support for the sector from the government, building on the White Paper commitments. It judges SMEs as firms producing less than 100 homes per year.

Key findings

  • Four in five SME housebuilders have gone out of business since the last housebuilding boom
  • By returning to the same level of market plurality as in 2007, we could build 25,000 more homes every year
  • Small housebuilders were responsible for 3 in 8 of the UK’s new homes before 1990, today they only deliver 1 in 8
  • The British Business Bank has yet to allocate funding for property firms
  • The Homes & Communities Agency must lend a weighty £56m a month to achieve its target to supply £3 billion of housebuilding finance by March 2021

The report laid out four recommendations to bring on change and increase support for SME housebuilders.

Report recommendations

  • Apportion a quota of public land for sale only to SMEs
  • Simplify tax burdens to help property SMEs reinvest capital into business development
  • Mandate state-backed finance bodies, like the British Business Bank and Homes & Communities Agency, to begin or accelerate the provision of funding to property SMEs
  • Initiate a strategy to boost competition by enlisting cooperation of the offices of the Housing and Small Business Ministers

Calling for the sector to work collaboratively to promote growth, Christian Faes, Co-Founder & CEO of LendInvest, said: “The Housing White Paper showed us there are no quick fixes, but incremental improvements can and must be made. If we’re going to encourage people to forge careers in property, they need to know that their businesses will be treated the same as start-ups and scale-ups in other productive sectors. Failing that, we risk losing another generation of property entrepreneurs.”

 Editor’s comment

The loss of SME housebuilders is a two-fold blow. We have lost these small, dynamic and flexible firms that should be contributing to our housing supply, bringing on locally-produced homes for local people, built by local people.

But as well as this, the loss of nearly 10,000 firms actually represents a significant army of skilled labour that these firms used, whether employed or contracted. And once out of the market, the skills that they would have passed down to younger generations are also lost.

At least the government is now waking up to this, and is promoting SME builders and a new generation of skilled T-levels, as announced in the White Paper. But it’s a big gap to plug. And it’s crucial to get right, as custom build developers and enabler are some of the property entrepeneurs that Faes is talking about.

Leave a Comment

To comment you need to login or register