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Will SME problems be tackled in 2016?

The confident attitude of 2015 has been more tempered of late – a series of poor quarterly ONS growth figures may translate into a confirmed contraction in the final quarter of last year.

This loss of buoyancy was reflected in the FMB’s own State of Trade Survey, which found workloads for SMEs across the UK slowed during Q4 2015. This means the coming 12 months will be vital for the industry if it’s to build on the hard-earned gains of the past few years.

Here’s what we expect (and hope) to see during 2016.

More investment

Strong consumer confidence and rising house prices should continue to encourage homeowners to invest in their properties, which means there could be plenty of work going around for firms specialising in home improvement.

Rapidly escalating labour costs and a hyper-competitive market will continue to squeeze margins, however, meaning it will be far from plain sailing for the repair, maintenance and improvement sector.

This year will be interesting in terms of smaller contractors’ relationship with the public sector. The government is continuing its drive to ensure a higher proportion of public spending is with SMEs, both through the setting of targets and the introduction of new procurement mechanisms.

“That more than two-thirds of councils are still not using PAS 91 is extremely disappointing”

This is all positive, but the commitment of central government to this objective needs to be replicated more consistently across the wider public sector and particularly among local authorities.

The findings of recently published research by the Electrical Contractors’ Association showing that more than two-thirds of councils are still not using PAS 91 were extremely disappointing. There is no excuse for this as it makes bidding for public contracts more difficult for small building firms while also adding to the workload of the local authority.

Housebuilding resurgence

More intriguingly, we should see the first instance of direct state housebuilding in decades, with SMEs at the forefront of that vision.

There was barely enough time to welcome in the New Year before the government announced its pilot scheme to “directly commission” 13,000 homes on public land across several key strategic sites, primarily using smaller building firms to deliver this.

Indeed, with the government aiming to build one million new homes by 2020, we anticipate that this will be underpinned by a recognition of the crucial role that SME housebuilders must play in realising this.

“All these reforms could still fail to deliver, however, if planning departments continue to suffer from chronic under-resourcing”

There are further signs of progress to this end: the new Housing Development Fund (formerly the Builders Finance Fund) has been souped up, and the review of the National Planning Policy Framework should yield further changes, which will be supportive of small-scale developers.

A further crucial development that we anticipate is the re-introduction of a site size threshold for certain section 106 contributions.

All these reforms could still fail to deliver, however, if planning departments continue to suffer from chronic under-resourcing. This is a problem that will need to be addressed in 2016.

It looks increasingly likely that planning fees will need to rise to address this under-resourcing.

Providing these funds are ringfenced for their designated purpose and can result in demonstrable improvements in turnaround times and service levels, this is something the industry would be more than willing to accept. There’s also the interesting prospect of developers being allowed to use private companies to process applications.

In short, we are looking ahead to what should be an interesting 12 months for the construction industry – there’s plenty of room for positivity, but absolutely none for complacency.

Brian Berry is chief executive of the Federation of Master Builders

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