This report sets out the findings from LSE London research commissioned by the Federation of Master Builders (FMB), with the purpose of exploring the economic value of SME housebuilders. The report starts from a literature review and by an analysis of historical and current primary data from FMB; followed by a survey of SME builders; interviews with a small number of respondents to the questionnaire, together with other relevant organisations. The objective is to understand better how the sector operates; what are the most important constraints faced by small builders; and the potential opportunities for an increased presence of SMEs through the removal of the barriers to their involvement.
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Key Findings
- SME housebuilders are crucial for:
- Local expertise and flexibility in smaller or complex projects overlooked by larger developers.
- Development of awkward sites (e.g., ex-industrial land, repurposed buildings).
- Strong community connections and focus on quality.
Barriers Faced by SME Housebuilders
- Planning System:
- Delays, complexity, fragmented processes, and lack of local authority (LA) resources.
- Perceived bias towards larger developers.
- Land Market:
- Difficulty accessing suitable and affordable land.
- Finance:
- Insufficient access to affordable funding and high upfront costs.
- Labour and Materials:
- Shortages in skilled labour and rising material costs.
- Regulations:
- High burdens related to environmental and heritage preservation.
Opportunities for Growth
- Leveraging quality and customisation as unique strengths.
- Potential for growth in green buildings, self-builds, and high-end properties.
- Collaboration with local authorities on small-scale or brownfield developments aligned with regional goals.
- Promoting innovation, sustainable practices, and local employment.
Recommendations for Change
- Planning System:
- Streamlining processes and identifying more SME-suitable land.
- Reducing regulatory complexity and planning fees.
- Finance:
- Government-backed low-interest loans and more affordable funding options.
- Skills Development:
- Greater focus on apprenticeships, training, and pathways for school leavers.
- Support Mechanisms:
- Partnerships between SMEs and larger developers to enhance competitiveness.
- Improved support for sustainable building practices and reduced development costs.
Conclusions
- Targeted government interventions are essential to:
- Create a level playing field between SMEs and larger builders.
- Address critical barriers to unlock SME potential, leading to increased housing variety, sustainable practices, and innovation.
- Proposed measures include low-interest loans, apprenticeship schemes, and reduced costs, fostering sector-wide benefits.
