SMEs: The key to the construction sector’s future

In 2016, 99.5% of the 5.5 million businesses in the UK were small and medium sized enterprises (SMEs), accounting for 60% of all private sector employment in the UK, and a huge proportion of the 240,000 construction service providers that operate within the UK.

SMEs are a real driving force in the construction sector – devoting time to improve their technical expertise and pioneering ground breaking technologies that push the boundaries of innovation in the industry. Technologies such as modular construction and 3D printing are revolutionary; as such the investment SMEs put into the development of these is vital for keeping the UK ahead of the curve on the world economic stage.

SMEs also lead the way in providing apprenticeship opportunities within the industry, and our report 'Sustainability in the supply chain' found that 76% employ between one and ten apprentices. It is then no surprise that a recent report by the Federation of Small Businesses found that SMEs are critical to achieving the government’s target of reaching 3 million new apprenticeships by 2020.

Support for SMEs is therefore vital for both the UK economy as a whole, the future of the construction sector and the local economies that they enrich.

Despite their significant numbers, the landscape for SMEs in the construction industry is still a challenging one, most recently addressed by the Home Builders Federation report on the decline of small housebuilders. Visibility of supply chains is often cited as a big problem for SMEs – in our report Sustainability in the Supply Chain 51% of SMEs said they did not feel well informed about future public sector contracts.

Brexit is also producing many barriers to growth, threatening to worsen the skills shortage that is already at breaking point, given that approximately 7% of the UK construction workforce are EU nationals. Additionally, the majority of SME builders have reported an increase in material prices due to the depreciation of the pound, with anecdotal evidence already emerging that the cost of Spanish slate and timber have increased by 22% and 20% respectively – something that is expected to get worse in 2017 as the pound continues to depreciate, as our exit from the EU plays out.

These barriers to growth can be overcome in part by best practice procurement processes, which emphasise collaborative thinking. The use of frameworks can provide SMEs with greater forward visibility of pipelines of work and the opportunity to become an essential part of the supply chain, which means they can be closely involved in ground-breaking projects and the rich experience this provides. Additionally, collaboration within the supply chain fosters relationship building with local authorities and major players – something that is likely to have a long term positive impact on SME businesses.

Our delivery partners currently engage with over 36,000 SMEs, who play a crucial role in the successful delivery of every project undertaken through our suite of frameworks. On a day-to-day basis, clients are encouraged to collaborate with SMEs they have worked with previously, where they have proven reliability and have demonstrated value for money through their work.

The use of frameworks is also financially beneficial for SMEs. Our agreements mandate that delivery partners must pay their supply chain promptly, ensuring they drive forward the growth and the sustainability of local businesses. SMEs also need to be able to access the funding to innovate, grow and evolve. Recent research shows that 540,000 SMEs in the UK are unsure about being able to access the funding they may need to grow or even survive. Providing suitable advice and education for SMEs is absolutely crucial and must be accompanied by greater lender understanding of SMEs’ needs and increased efforts from government to ensure that suitable SMEs and lenders are married up.

The government's Housing White Paper released yesterday puts local authorities centre stage of the country’s housing challenge. The government has rightly recognised the role that councils can play in delivering new homes, and it is about time that they were given the powers to do so – but the government must also give them the resources they need. Without the planning and regeneration officers needed to process applications and complete Local Plans, the government’s aspiration for hundreds of thousands more new homes will fall flat. Simply chastising overwhelmed and under-resourced local authorities through a new monitoring system won’t speed things up. The government have paid lip service to the financial pressure on planning and regeneration departments, but a crack team of super-planners and special deals for larger authorities will not be enough to tackle a national housing shortage.

However, what is clear is that the experience of local authorities across joint venture partnerships, major infrastructure projects and housebuilding is now beginning to be recognised.

The government must continue to unlock the potential of local authorities to solve the housing crisis through new and innovative means - give them the funding and the finance, combined with new powers, and we could be on the cusp of a locally-led housebuilding revolution.

In our video Delivering Excellence, John Townsend from Nottingham SME Bonam & Berry, discusses how working with SCAPE and delivery partner Willmott Dixon helped them to win a large contract in the area and employ local people.