4 Nov 2022

Property Week – SME builders ready, willing and able

In a letter to Property Week, our CEO, Mark Hawthorn discusses the challenges faced by SME housebuilders and that with Government support, SMEs are ready, willing and able to increase housing supply.

It is well documented that a revival of small and medium-sized housebuilders would make a substantial contribution to our new housing requirements. Their output has fallen by around 75% from their peak, which represents a huge and increasing supply gap.

We commissioned Savills to review this important, yet declining, subsector. Its research demonstrated that an SME revival to historic levels would provide 55,000 extra homes with a GDV of £15bn to £20bn. For context, this level of output is more than the combined output of Barratt, Taylor Wimpey, Persimmon, Bellway and Vistry, the current five largest housebuilders, which are generally at capacity.

We then commissioned Chris Walker, a former Treasury and MHCLG senior economic adviser, to analyse the findings. Two of the major conclusions from his review were that a restoration of SME output would support almost 200,000 jobs and deliver £12.9bn of gross value add.

While this would appear a compelling reason to increase support to SME housebuilders, the reality is in stark contrast. In recent times, we have continued to see SMEs battle on all fronts on a daily basis. There is the continuing war of attrition with planning, finance, materials, labour and red tape that SMEs face in all markets.

Additionally, they face adapting to the various changing regulations as we move towards net zero together with the imminent withdrawal of Help to Buy.

Add to this list an increasingly softening market, rapid interest rate rises and general political and economic chaos, and it does not bode well for SMEs and supply. We are seeing increased volumes of sales guarantee submissions from lenders who will only participate if we underwrite. Our business is countercyclical and a very reliable indicator of market confidence, which itself influences supply.

A focus on the revival of SME housebuilding is low hanging fruit for our new prime minister. SMEs bring forward sites that would otherwise lie undeveloped; they employ and contribute at a local level and do not landbank. This is a latent source of supply that is generally ready, willing and, with support, very able.

View Mark’s letter on Property Week here.

Featured Post
Partner Network

Get the latest
industry insights

with LDS Boost

Providing SMEs with the resources of PLCs via easy access to:

  • Key knowledge
  • Our trusted network of useful contacts
  • Tools to help maximise efficiency and profit

Transforming development finance
for housebuilders, lenders and brokers