The Role for SME Builders

in Increasing Housing

Supply

Wednesday 21st March 2018

LGA Housing Conference18 Smith Square

London SW1P 3HZ

Brian Berry

Chief Executive, FMB

The Federation of Master Builders

• UK’s biggest employers’ body for SME construction firms – over 8,000 members

• FMB Membership offer is unique -independent inspections

• Members’ Code of Practice

• Warranties

• Customer Complaint Service

• 45% involved in building new homes

UK Construction Industry

A great British industry !

• Nearly 300,000 companies connected to the construction industry

• Employs 3 million people

• Industry worth £124 billion per annum

• Contributes around 7% of UK’s GDP

• Every £1 invested generates £2.84

• 92p of every £1 spent on construction is retained in the UK.

SME house builders

Shrinking supply…

• Decline in SME housing building

• 1988: 66% - 2016: 23%

• 1988 last time we built 200,000

new homes

• Firms building <100 fell by half

since 2008

• Huge loss of capacity and

reduced competition

SME House Builders

Vital role…..

• Local growth - SMEs create local jobs

• Employment - SMEs employ 66% of all apprentices in construction

• Competition – without SMEs market remains limited

• Quality – SMEs compete on quality bespoke housing

• Small sites - build on small sites, often brownfield

SME house builders

Three key barriers ……….

1. Availability of suitable, viable smaller sites

2. Availability of finance

3. Cost, complexity and delay in navigating planning

1. Access to land

• FMB 2017 Survey – 62% of members cited ‘lack of available land’ as the biggest barrier to increasing output

• Issues involve• Land of right size in the right location

• Expectations of getting planning permission

• Price expectations of landowners

• Local Plans and five year land supplies tend to be focussed on larger strategic sites

2. Access to finance

• Since the financial crisis of 2007/08 SME housebuilders have faced severe difficulties securing finance

• FMB 2017 Survey – 54% of members cited access to finance as a major constraint

• Banks reluctant to lend for small scale residential developments

• Significant improvement in last 2-3 years, but mainly from alternative lenders

• Lending terms too high

3.Cost and complexity of planning

• 79% of SME builders view planning process for small sites too heavy handed

• Complexity and bureaucracy within the planning application process

• Large amount of information and detailed pre-application discussions required for outline planning permission

• 43% of FMB members report info requirements increasing

• Under resourcing of planning departments

SMEs and Housing Supply 29.11.16

Government support …..

1. Housing White Paper

2. 2017 November Budget

£15bn extra funding for capital funding, loans, guarantees to support housing over next 4 year.

• Home Builders Fund an extra £1.5bn

• Small Sites Fund (remediation) £630 million

• Local Authority house building £1bn

• New financial guarantees £8bn

• Develop construction skills £34bn

SMEs and Housing Supply 29.11.16

Government support …..

Small sites and planning

• ‘Great weight’ given to small sites• ‘Presumption’ in London

• Greater clarity and support for windfall sites

• 20% of housing delivery on smaller sites?

Local Authorities

FMB/LGiU Research Report

‘Small is Beautiful’

• Lack of land one of the key barriers to build more homes

• Issue is finding the right site in the right location at a reasonable price with reasonable chance of obtaining planning permission

• Local government and builders need to work together

• FMB joined up with LGiU

FMB/LGiU ‘Small is Beautiful’

Key Findings:

• More than half of councils deliver fewer than 40%

of homes on small sites

• 79% SME builders think the planning application

process for small sites is ‘too heavy handed’

• 64% builders & 45% of LAs see under resourcing

of planning depts. as a barrier to developing

small sites

• 55% of LA respondents said quality of planning

applications for small sites often poor

• 80% SME builders said LAs in their area do not

proactively communicate or engage with them

Case Studies - Small is Beautiful

• Birmingham City Council• Struggled to find builders to build on small sites

• Set up on-line planning portal

• Leeds Council• Encourages analysis of its Strategic Housing

Land Availability Assessment (SHLAA) to identify sites and broker relationships with builders

• NE Lincolnshire Council• Established a local development forum to allow

all non-site specific issues relating to development to be discussed

• Barnet Council• Set up a specialised pre-application service

which provides a premium fast track planning support for a fee. Dedicated lead officer to manage the process

Skills Challenge

Record skills shortages - FMB Q4 2017

• 68% difficulties hiring bricklayers

• 63% difficulties hiring carpenters

• 48% difficulties hiring plumbers

Brexit looming

Skills Challenge

Construction Industry Brexit Manifesto

• Construction industry has united

• 12.6% of construction workers born outside the UK

• Need for settled status

• Longer transition period

• Need should be determined by occupations and not skills levels or income

• Importance of self employment

Future Skills Outlook

• Annual recruitment requirement is 46,420

• Total recruitment requirement up until 2020 is 232,000

• 400,000 workers expected to retire between before 2025

Skills Challenge

Going forward:

1. Improve the image of the industry

2. Improve supply chain collaboration

3. Train our workforce to a higher standard and upskill

Questions?