SMEs are an important part of the development picture. Nic Davies considers how clients, social landlords, local authorities and central government can adjust their practices to help ensure small builders can get work and contribute to addressing the national housebuilding challenge
The prime minister and the chancellor have both recently made the welcome call for Britain to “build, build, build” our way out of the coronavirus-induced economic slump. As a director at a small affordable house builder, the obvious question is: how can SMEs help to deliver this, and to sustain and create jobs? As is often the case, history provides some important pointers.
For me, the memories remain fresh of the last recession following the global financial crisis of 2008. At that time housebuilding – especially affordable housebuilding – was seen as an important way for the economy to bounce back. The government pumped billions of pounds into the housing sector through an expanded capital programme. However, SME builders were unfortunately not supported to be part of the solution and so many businesses did not survive.
A recent report by the Home Builders’ Federation found that in the period 2007 to 2009 a third of SMEs ceased building homes. A return to the number of builders operating in 2007 could help to boost housing supply by 25,000 homes a year. So, what are the lessons we can learn from a decade ago to ensure SME builders are able to survive the recession and help lead the recovery?
First, it is important to note that the support offered to UK companies through the furlough scheme, grants and low-cost loans has been crucial. This has ensured that SMEs such as Helix have not only been able to weather the storm, but also that they are hitting the ground running as our teams return to work. For us, jobs have been protected thanks to clients having the confidence to stick to their investment plans.
This confidence has positive knock-on effects in other ways at SMEs. As small businesses, we are close with our people. Because we have been supported through the pandemic, we have been able to keep people in employment. But more than that, through regular weekly one-to-one calls we have been able to involve colleagues in planning for the future and to support their well-being at an incredibly stressful time.
“Different attitudes are required by procuring authorities to avoid a repeat of the post-2008 recession. At that time a procurement race to the bottom on pricing led to massive housebuilding consolidation, failure of SMEs and ultimately the well-publicised issues with poor-quality homes”
Fair access to procurement
Second, different attitudes are required by procuring authorities to avoid a repeat of the post-2008 recession. At that time a procurement race to the bottom on pricing led to massive housebuilding consolidation, failure of SMEs and ultimately the well-publicised issues with poor-quality homes. When money is tight, value is all important, but it is heartening to see several projects we have tendered for in recent months being procured on a blend of cost and quality, not just focusing on lowest-price wins.
But there is more that can be done to structure procurement processes to ensure clients get the most creative and competitive bids from a range of small and large firms. For instance, to make tenders accessible to SMEs, central government and local public sector procurement could lower financial hurdles for newly established companies. Clients could also explore more innovative models such as co-investment to support SME growth – such as the £4.5bn Home Building Fund.
More homes, more jobs
Get this right and the potential upsides are huge. More sustainable, skilled jobs throughout the country – not just in the South East; more robust house builders to boost much-needed construction capacity; more high-quality, affordable homes; and greater choice for clients.
Get this wrong and we will be missing the chance to create a new normal – it will just be a repeat of past mistakes.
At Helix, we have seen enough to feel optimistic about the future. We are continuing to invest in our people and our business to ensure we have the talent to thrive. Last week, the chancellor outlined fears for a surge in youth unemployment – yet we were proud to be able to tell a different story. Trainee estimator Ollie Pearce secured a place to study quantity surveying at the University of Westminster, which Helix will be sponsoring. We see how Ollie can contribute great things to our business. With the right procurement approach, Helix and other SMEs stand ready to do the same, working with our affordable housing clients.
Nic Davies, managing director, Helix