NFB: Alternative finance can drive regional development for smaller house builders

KPMG has advised UK house builders to diversify their debt, as they could face the possibility of shutting off vital access to finance.

The consultancy delivered this warning, as more than 80% of UK housebuilders’ estimated £10 billion worth of debt is held by just five high-street banks.

The National Federation of Builders (NFB) appreciates the importance of helping housebuilders diversify their debt, but also thinks that more should be done in promoting alternative finance products to construction SMEs for them to successfully diversify their debt.

According to the British Business Bank (BBB), awareness of different finance products is decreasing as 38% of SMEs still went directly to their main bank when needing a loan between 2016 and 2017. The BBB additionally highlighted a regional imbalance in the distribution of finance to companies that wanted to rapidly grow, with almost 60% concentrated in London and the south east.

Construction SMEs make a uniquely positive contribution to local communities, since they normally work within 15 miles of their head office. For every £1 invested in construction SMEs, 90p remains locally and is used to hire local workers, train local young apprentices and boost the local economy.

Paul Bogle, head of policy and research at the NFB said:

“SME house builders have close ties with their local communities. They build homes more quickly and to a higher quality standard than major house builders. Unfortunately, they still struggle to access finance in order to build more homes.

“That is why ensuring that SMEs are made more aware of alternative finance choices is vital to tackling the housing crisis and getting Britain building.”