The latest figures from the Office for National Statistics (ONS) show that monthly construction output has increased, yet UK SME housebuilders feel the pain of soaring costs and struggle to meet customer demands.
Monthly construction output was up by 1.5% in volume terms in May 2022; marking the seventh consecutive month of growth following the upwardly revised increase to 0.3% in April 2022; May 2022 is a record high in monthly-level terms (£15,053m) since records began in January 2010.
The level of construction output in May 2022 was 4.1% (£598m) above the February 2020 pre-coronavirus (COVID-19) pandemic level.
Stuart Law, CEO of the Assetz Group, said: “Whilst today’s figures reveal a record boost in the construction industry, the price of key materials and labour shortages continue to make business untenable for many SMEs.
“A record number of UK construction businesses went bust last year as smaller companies struggle with soaring construction costs and backlogs in the planning system (3,400 in the year to April).
“Rising costs, caused by inflation, Brexit and material shortages are just a few challenges disproportionately impacting smaller builders.
“Whilst more companies are beginning to stockpile materials, as costs of products are reaching new highs, many SMEs don’t have surplus cash to buy supplies in advance or the capability to transfer increased costs onto the customer.
“As a result, what should be a profitable time for small and medium sized businesses is actually becoming a time of loss and many SMEs are in fact, going under.
“Banks are visibly pulling back funding for SMEs and the government has shown little willingness to support or revitalise the SME construction sector. In 1988, small developers were responsible for four in every ten new build homes. Today, it is around just 10%. If this continues, we risk a huge crisis in the construction industry with even more SMEs going under, and dwindling hopes of meeting the government’s target of building 300,000 new homes every year.
“The government can no longer side-line this issue – large construction companies will only solve a fraction of the issues. We need to see quick change that gives SMEs greater access to alternative funding, such as peer-to-peer financing, as well as simplification of the planning process. This will enable SMEs to grow and scale up.
“In the current uncertain climate, investors are backing this shift towards alternative financing. Our recent research revealed 70% of Assetz Capital’s investors (1,171 respondents) don’t invest in bricks and mortar, while 91% of those respondents said they haven’t held a bricks and mortar investment for the last five years.
“This highlights a shift towards more innovative, alternative finance options within the housebuilding sector. Investors are keen to back SMEs, and if we want to revitalise the construction industry and boost growth, we must think of new and alternative ways to fund the industry.”
