FSB calls for more support for SMEs in the construction industry

  • 22 Nov 2021

Construction industry needs blocks removing to unleash power of SMEs

FSB is calling on the Government to address key issues which are holding back small and medium (SME) sized construction firms, and preventing the UK from building enough homes.

In a bid to tackle Britain’s housing shortage, the Government has set a target to increase housebuilding to 300,000 units a year by the mid-2020s. Based on current output, this target will not be met.

Roni Savage, FSB Chair of Construction Policy (pictured above, second from right), explained that in order for this target to be met, it is vital that SME construction firms are able to increase their supply to the construction sector.

 

Roni said: “FSB recently held a roundtable with construction SMEs and several impediments were raised, including access to finance, poor payment practices, labour shortages, rising costs and procurement rules.

“Our members have told us of the difficulty in getting banks to finance certain projects based on where they are in the UK. We were told that banks were more reluctant to finance projects in Wales and the north of England.”

But even funded projects can prove problematic for SME firms, with construction companies reporting that late payments are rife within the sector.

Roni said: “Issues around poor payment were expressed by a number of members of the roundtable. Construction has traditionally been one of the worst sectors for prompt payment.

“A lot of attention has been dedicated to this area, with FSB gaining a number of policy wins including working on the establishment of the Small Business Commissioner (SBC). The SBC covers the whole of the UK - England, Wales, Scotland and Northern Ireland. There is more work to be done to eradicate the poor payment practices in the Construction sector, and we must continue to explore this.”

 

Further issues that are holding back SME construction firms include contractual or procurement requirements. When tendering for a contract, many small firms face insurance requirements, ITT and PQQ’s that are so demanding many SMEs simply do not engage.

Roni explained: “This creates ‘middle man’ situations where SMEs carry out the works via a contractor who satisfies the contractual requirements, that the individual SME does not.

“Contractual requirements, especially in public sector contracts, has been a very active part of FSB’s work over the last five years. Issues over contractual requirements are not unique to construction, as they occur in almost all public sector contracting.

“FSB has been working hard with government to increase the number of SMEs working directly with central government and local authorities. Part of this is to reduce instances where prohibitive terms prevent SMEs from bidding for contracts.

“If a FSB member feels that they have been excluded in such a way, especially with regards to public sector contracts, they can contact the Public Procurement Review Service who can anonymously investigate.”

FSB have also noted concerns around nuances in the planning application process, including, complexities, NIMBYism, S106 contribution transparency and inconsistent local validation processes. It is acknowledged that reforms are necessary to make it easier for SMEs and others to increase housing supply, and for local plans to ensure there is sufficient land available to SMEs to sustain delivery. FSB will continue to work in this space. 

 

More recently and somewhat related to the Covid19 pandemic, further factors have been identified as having a negative effect on the construction sector. Material & labour shortages are causing building projects to be cancelled, put on hold, and delayed. This is also resulting in astronomical increase in costs, making some projects unviable. One solution appears to be homegrown manufacturing, which will not be an immediate fix.

Roni added: “FSB will be reviewing all of these issues and working on plausible solutions in support of our small business members. Should you have any views, please email [email protected]

“I will be arranging another roundtable for January/February 2022. If this is of interest, please do also make contact.”

Related topics