Lack of finance blamed as barrier to building trade

Over half of small house builders (54%) say accessing finance is a major barrier to their ability to build more homes, up from 50% in 2016.

The research was carried out by the UK’s Federation of Master Builders, which acts as the voice of small construction; influencing policy makers to improve the regulatory environment for construction SMEs.

Brian Berry, chief executive of the FMB, said: “Almost a decade after the financial crisis, access to finance for small house builders is getting worse instead of better.

“The results of the FMB House Builders’ Survey suggest a slight worsening in the problems these firms face in accessing the finance they need to build.”

The fall in the measure of access to finance is the first since 2013, raising concerns that business growth will stall.

Other issues concerning the building trade include a lack of available land and a shortage of skilled workers, particularly relating to the impact of Brexit on access to employees from EU countries.

The FMB report comes following recent research which showed that the majority of SMEs fund their business through personal savings.

The UK government is trying to expand the availability of funding to companies to drive growth.

The finance platforms referrals scheme is one of a number of government measures designed to help small businesses access the finance they need to invest and grow.

Launched in November 2016, it requires nine of the UK’s biggest banks to pass on details of small businesses they have turned down for loans.

Details are passed to three finance platforms – Funding Xchange, Business Finance Compared and Funding Options.

These platforms then share their details with alternative finance providers and go on to facilitate a conversation between the business and any provider that expresses an interest in supplying finance to them.

To date 230 small businesses rejected for finance by the UK’s biggest banks have received £3.8m from alternative lenders.

The loans represent a tiny proportion of the businesses that are declined financing by major banks each year, with an estimated 50,000 turned down last year.

Mike Cherry, national chairman of the Federation of Small Businesses, said: “To provide further economic benefit across the UK the scheme must now scale-up, with more referrals and more businesses successfully securing finance as a result.”

Research shows that 71% of businesses seeking finance only ask one lender and, if rejected for finance, many simply give up on investment rather than seek alternative options.