New research has found that the construction sector has seen one of the slowest increases in SME growth since 2010 as a result of the barriers the industry faces.
The research, conducted by Hampshire Trust Bank in partnership with the Centre for Economics and Business Research (CEBR), has revealed the three sectors that demonstrated the highest growth were technical and professional (39%), information and communication (33%) and business services (25%), with construction falling behind the UK average of 17% at 4%.
From its experience of working with SME house-builders, Hampshire Trust Bank attributes the lower levels of SME growth to the high number of barriers they have to overcome, such as planning costs and access to appropriate finance, which it says is contributing to the UK’s broken housing market.
However, 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 a higher number of SMEs overall, but financial concerns were identified as barriers to growth in the industry, which may deter start-ups in the sectors. Three in 10 (28%) 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 house-builders and contractors.
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 house-builders 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 result in an uphill battle for smaller property developers.
“We were pleased to see the Government identify that SME house-builders 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.”
