The signs of industry recovery are promising and government-backed finance initiatives are opening up new possibilities.
Recent Office for National Statistics figures suggest that government schemes including Help to Buy and Funding for Lending are boosting housebuilding – a clear contribution to the 4 per cent rise in annual construction output.
While this is encouraging for all businesses in the sector, what does it mean to those SME building firms that are under financial pressure as banks have withdrawn credit facilities?
Such restricted borrowing by the banks may well lead smaller construction companies to believe that a credit drought is terminal everywhere they turn.
State schemes offer finance hope
However, through further government intervention – the Trade Credit Enterprise Finance Guarantee scheme, which Buildbase parent company Grafton Merchanting GB has signed up to – credit has become more free-flowing again.
“We are now seeing increasing enquiries, healthier order books and even supply issues with certain products”
For firms which, for whatever reason, have unhelpful credit ratings, we think this is good news.
While the new housebuilding market is not necessarily beneficial for our SME building customers, its potential impact on secondary house moves among existing housing stock most certainly should be in terms of repairs, maintenance and improvements.
The number of house moves in this part of the market is a major driver, with homeowners seeking typical renovations as new patios, bathrooms and extensions. Without home movement, RMI remains static and all our order books reflect that.
Home improvements on the up
But what we are now seeing across our Buildbase branch network is increasing enquiries, healthier order books and even supply issues with certain products, which suggests a rejuvenated demand by householders wanting to improve their properties and engaging our small project customer base to deliver the work.
As up to 80 per credit of our business is based on providing credit to the industry, we see that offering a comprehensive credit facility is part of our supply chain responsibility.
This already covers about 80,000 credit accounts served by builders’ merchants businesses within Grafton Merchanting GB, and the TCEFG is now an additional part of that credit capability.
Additional credit gives SMEs the opportunity to take on larger projects they otherwise couldn’t in the absence of bank lending.
The backing of government initiative schemes such as the TCEFG is extremely important in helping to restore confidence to both the supply and delivery sides of the market.
It’s all about accelerating the speed of change and sector recovery and, as long as SMEs manage their credit line as part of a fully developed business model, it’s an integral part of running their operation and building a solid enterprise as the economy recovers.
Stephen Thompstone is managing director of Buildbase