Aldermore: Smaller developers struggling

The plight of small developers is behind today's dwindling construction figures released by the Office for National Statistics, Aldermore’s group managing director of mortgages Charles Haresnape has declared.

He said SME and regional sectors built as much as 80% of new homes in the UK over the past six years, but this figure has now fallen to under 50%.

ONS Output in the Construction Industry data found that construction fell by 0.5% in the month to November, defying an expected 0.5% rise from Reuters economists. Haresnape declared the data “disappointing ”

He said: “While the fortunes of the big four housebuilders have continued to improve, increasing output from smaller developers will be crucial in helping to reach the targets set by the government for 400,000 affordable new homes by 2020.

“In the 1990s, the SME and regional sectors built as much as 80% of new homes in the UK but over the past six years this figure has fallen to under 50%.

“Despite the huge demand for new houses, smaller developers continue to struggle with access to finance, with a recent industry survey showing that more than 50,000 construction and real estate firms experienced have begun the year in ‘significant’ financial distress."

Construction also fell by 1.1% year-on-year to November, as the ONS said construction output would need to increase by 2.6% month-on-month to December to avoid a fall in the fourth quarter of 2015.

Haresnape added: “The Home Builders Federation have said that the new housebuilding targets are achievable, and proposed changes to planning regulations and incentives for building on brownfield land are positive steps.

“However, unless more is done by lenders to increase funding to smaller regional developers, the potential for the industry to reach 200,000 homes per year - a level of building not seen in Britain since 1989 – will be less likely.”