The recent ‘Crane’ survey by Deliotte was positive for two reasons. Firstly, a busy skyline is seen as a barometer of strong general heath for the commercial construction industry. New offices, hotel or leisure complexes equal wider investment into local areas and its economy. But the news was also a boost for regions outside of the capital and the governments vision for our powerhouse regions it believes can propel the UK to greater, more balanced prosperity for the whole country.
Birmingham, Manchester and Leeds are all seeing significant rises in construction. The Birmingham Crane Survey identifies 1.4m sq. ft. of new office space under construction – a 50% increase on the previous year (969,000 sq. ft.). The surge signals the highest level of activity since the report was first published in 2002.
Birmingham has also seen a ten-fold increase in residential schemes under construction last year, totalling 2,331 units in the city centre. Manchester’s city centre has a record 22 residential projects breaking ground in 2016. This Northern Powerhouse’s skyline continues its rapid transformation with growing fashion, digital, and creative industries reversing the skills drain that typically saw talent head to London. And, where funky new offices open, housing, coffee shops or restaurants will follow.
Across the Pennines, Leeds is also in the midst of a construction boom with 20 major schemes completed in 2016, driven largely by the retail sector as the delivery of new shopping areas doubled the average annual total of retail space.
Also in these cities, the hotel sector is also benefiting from serious investment. Manchester has over 1,000 new rooms under construction, the largest delivery for ten years. Leeds tells a similar upbeat story, throwing its doors open for tourists and business travellers is another sign we’re gearing up to life after Brexit.
Student accommodation is an increasingly active sector across a number of major cities and to fully deliver on the regional powerhouses, graduates need to be confident they can find careers with local businesses that are both established and hold exciting prospects.
In fact, a migration from London may have already started. Countrywide recorded a move of around 74,000 homeowners leaving the capital in 2016 for the home counties, the midlands and northern cities. The top end of the London property market has seen price drops of around 12% and whilst the rest of London will continue to see low single figure growth in 2017, it’s outside of the capital that is forecast to see prices rise more quickly.
However, whilst this is all good news for the big construction or house building companies, SME’s are again faring less well.
Back in December, the Home Builders Federation highlighted the challenges faced by SME builders and at a time when getting on the property ladder remains out of reach for the majority of 20-30 year olds either fed up of renting or living at home with mum and dad.
The Federation looked at the needs to urgently address finance, planning regulations and reels of red tape that prevent smaller firms from playing their part in tackling the housing crisis.
Over the past 25 years the number of SME builders has reduced by 80%, but just getting back to the numbers operating ten years ago – a modest 15-20% rise – could produce an additional 25,000 homes a year.
Whilst housing supply has increased significantly in the past three years such that it has now reached the much vaunted 200,000 homes a year, the vast majority has come from the largest builders. With Government keen to see numbers continuing to increase, enabling SMEs to increase output will be key.
Throughout the 1960s and 70s small companies could set up, grow quickly and establish themselves as significant contributors to local economies. This meant that by 1988 more than 12,000 SMEs were building new homes. Today however the number of SME builders has dwindled with very few new entrants able to secure a foothold and even many established businesses unable to grow.
The main barrier facing SME builders is access to finance. Even as the major banks have increased lending to SME’s the rates are not as competitive as they should be and neither are the types of funding solutions they can provide.
This lack of competitive funding is supported by the Federation, who revealed that the situation has improved little since the recovery from the 2008 financial crash; whilst the risky and expensive process required to achieve planning permission has thwarted SME’s without the infrastructure and financial ability to navigate things.
So, what needs to happen to reverse this sadly typical cycle where the Bank of England continues to hand out subsidised money for it not always to be released to UK businesses?
Brexit, that double edged economic sword, could again provide the catalyst for change. By lifting barriers for builders to access tax incentives or breaks that are enjoyed by other sectors – such as technology, research and development or creative industries. We should also be providing more technical and planning support for fledgling businesses and continue to rip up laborious planning regulations to fast-track brownfield sites around towns and cities.
Last year saw some pretty major decisions and a shifting of policy with projects such as Hinkley, HS2 and the third Heathrow runway all signed off. There are major road building projects underway with both public and private investment.
Everything is pointing in the right direction as we build our way towards a new future, but a shared society needs to include business large and small.