Small and medium-sized enterprise (SME) home builders play a pivotal role in shaping the UK’s housing landscape, delivering homes that cater to diverse needs and local communities.
However, as highlighted in the 2024–25 SME State of Play report, SME builders are facing numerous challenges and barriers to delivery, alongside some emerging opportunities to contribute to the nation’s ambitious housing targets. Read on for a summary of this latest report.
The key challenges
- Planning system hurdles
For the fifth year in a row, respondents considered delays in securing planning permissions and discharging conditions to be the most significant barrier to growth, with 94% of SMEs citing this issue and just 1% saying they had received planning permission in the last three months. Under-resourced Local Planning Authorities (LPAs) is often the cause of delays, impacting project timelines and cash flows. Political opposition at the local level also complicates planning, with 78% of SMEs identifying this as a barrier.
- Economic pressures hitting demand
The rise in interest rates, limited mortgage affordability and the withdrawal of the Help to Buy scheme have hit consumer demand hard. These issues disproportionately affect SMEs, which lack the financial resilience of larger developers.
- Resource constraints and costs
The supply and costs of labour continue to be a major obstacle, with 89% of respondents acknowledging its impact. Additionally, escalating costs in planning processes and utilities are creating financial strain, with 97% reporting increased costs of securing planning permissions.
- Sustainability standards
The introduction of the Future Homes Standard and Biodiversity Net Gain requirements, while crucial for environmental goals, add layers of complexity and cost for SME builders. Nearly half of the respondents cited these mandates as major barriers to growth.
Opportunities on the horizon
- Planning reforms
The government’s proposed reforms to the National Planning Policy Framework (NPPF) aim to reinstate mandatory housing targets and free up “grey belt” land. These changes could open opportunities for SMEs to access smaller, overlooked plots of land.
- Support for sustainable housing
A growing focus on green initiatives presents SMEs with a chance to lead in delivering eco-friendly housing. Proposals for green mortgages, buyer incentives for sustainable homes and increased subsidies could make sustainability-driven projects more viable.
- Infrastructure and utility improvements
Calls for consistent standards in the adoption of public amenities and utilities could simplify the development process, reducing uncertainties and delays.
- Diverse talent recruitment
Initiatives aimed at attracting a younger, more diverse workforce provide an avenue for addressing labour shortages. Support for training and apprenticeships could equip SMEs with the talent needed to meet future demands.
The path ahead
For SMEs to succeed, the government must act to simplify planning, invest in LPAs and provide targeted support. Focusing on sustainability and cutting red tape will help SME builders tackle the housing crisis.
Despite challenges, SME builders have shown remarkable resilience. With the right support, they can overcome barriers, seize new opportunities, and drive economic growth by delivering the homes the UK urgently needs.
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03.12.2024
Feature image: Sheriff Construction
Information source: The 2024–25 SME State of Play report, conducted by the Home Builders Federation, Close Brothers Property Finance and Travis Perkins plc. Download the full report here.
