Budget 2017: Chancellor must improve access to finance for small builders, says FMB

Posted On: 
8th November 2017

The Chancellor must take bold action in the forthcoming Budget to improve access to finance for SME builders if he wants to tackle the housing crisis, according to the Federation of Master Builders (FMB) Chief Executive Brian Berry.

Credit: 
PA Images

If the Government wants to solve the housing crisis, it must address the access to finance issue that local housebuilders continue to face. The Chancellor needs to commit to underwriting loans from banks to small house builders to get finance flowing into our sector once more. Nearly a decade after the financial crisis, difficulty in accessing finance remains a major barrier to small house builders increasing their delivery of new homes. Indeed, the FMB’s 2017 House Builders’ Survey showed little signs of improvement in this picture and if anything suggested slight deterioration in lending conditions. Assessments of lending conditions to SME developers were down slightly from 2016, the first fall in this measure since 2013. These difficulties make it much harder for existing SME house builders to flourish and grow and deter new firms from entering the market. This has resulted in a less dynamic house building sector that is less able to expand to build the homes we need.

If local housebuilders are to build Britain out of the housing crisis, the Chancellor must use the Budget to pull as many levers as possible in order to enable more finance to reach SMEs. One thing the Government can do is act to reduce the capital costs of lending to this sector for smaller specialist lenders. The initiative announced last week by the British Business Bank to extend its ENABLE Guarantee to house building by striking a deal with United Trust Bank is welcome. This type of Government action, because it pushes down the capital costs of lending to SME builders, will allow lenders to do much more of this. The Chancellor needs to back this initiative, encourage its expansion and explore all other options to reduce the risk and costs to banks of lending into this sector.

A second major challenge SME house builders face is the chronic skills crisis in the construction industry. The only real solution to the skills shortages we face will be a major increase in the training of new entrants into our industry. Central to this will be the need for a large increase in the number of apprenticeships undertaken. The Apprenticeship Levy will raise a significant amount of money from large construction firms to spend on apprenticeship training. Yet, due to the  prevalence of subcontracting and self-employment in our industry, there is a likelihood that huge amounts of this funding pool will be lost to the industry and will not end up funding apprenticeship training. As such, we are strongly urging the Government to revisit the possibility of allowing greater flexibility on the spending of Apprenticeship Levy vouchers on supply chain partners, specifically raising the cap of 10% of Apprenticeship Levy funds being spent in a firm’s supply chain.

Finally, the problems caused by dishonest builders continue to plague the construction sector. In recent years, the Government has doubled Insurance Premium Tax (IPT) from 6% to 12%, increasing the cost of over 50 million insurance policies. IPT is a stealth tax that hits reputable small builders and their customers particularly hard. The sharp increase in this tax has effectively provided an additional competitive advantage to unscrupulous and uninsured builders. It has therefore left consumers less protected and more vulnerable. The UK’s IPT is now the sixth highest in Europe and the FMB are calling on the Chancellor to commit to freezing IPT for the remainder of this Parliament.

To view the FMB’s full Autumn Budget Submission 2017 click here: www.fmb.org.uk/media/36105/budget-statement-submission.pdf