Low Levels of SME Growth in Construction

11th March 2017

It has been noticed in a recent study by Hampshire Trust Bank, based on research from the Centre for Economics and Business Research (CEBR), that the UK construction industry is rated amongst the lowest sectors to experience SME growth in the country, at just 4%. The national average across all industry sectors is at 17%.

Hampshire Trust Bank suggests that these low SME growth levels could be attributed to the challenges faced across the UK housing market, such as access to financing and increases in planning costs, yet acknowledges that the construction sector does have higher numbers of SMEs overall. Nearly a third (28%) of SMEs in the construction industry, however, cite market competition as the largest barrier to growth, and believe that this could be a deterrent to new SMEs entering the sector.

According to Robert Grigg, MD of property finance at Hampshire Trust Bank, 'Our report identifies SMEs in the construction sector have grown at a slower rate than other industries over the last few years. Our team works specifically with SME housebuilders and with demand for housing continuing to outstrip supply, our customers are coming up against barriers to developing this vital housing stock. Issues such as planning costs and turnaround times results in an uphill battle for smaller property developers.'

However, 54% of construction industry SMEs are showing optimism about economic prospects in the long-term, and about the opportunities for growth for smaller construction companies, particularly with the increased activity shown in cities like Birmingham, Manchester and Bristol.

Mr Grigg added, 'As we have identified, firms are finding new opportunities out of London and the South East in cities such as Manchester, Birmingham and Bristol and companies local to these regions should also start reaping the success of newly regenerated cities too. What is crucial is that the government focuses on how these SMEs can be more competitive quickly, to not only take a step towards boosting sector growth but help more people take their first steps onto the housing ladder.'

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