Lack of finance keeps smaller housebuilders trailing behind their bigger rivals

Kasmira Jefford
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Average House Price In The UK Rises 8% In The Year
Funing Options says difficult access to finance is a key driver in a shortfall in new homes being built (Source: Getty)

Profits at the top UK housebuilders may have hit a pre-crisis high but their smaller rivals are still struggling to recover as funding for larger projects remains scarce, new research suggests.

A construction boom has helped profit margins at larger housebuilders reach an average of 11.7 per cent for 2015 compared to their 2007 peak of 11.2 per cent.

However that contrasts with average profit margins of seven per cent for small to medium-sized builders, which is well below the 12.2 per cent recorded in 2006, research from Funding Options shows.

The business finance comparison site warned that strict loan-to-value limits set by bank is restricting the amount of work that smaller builders can take on, which in turn is preventing more homes being built.

Only 27 per cent of homes in the UK are now built by smaller housebuilders, compared with 44 per cent in 2008, according to research by the National House Building Council (NHBC).

Conrad Ford, chief executive of Funding Options, said: “The largest players in the housebuilding sector have put the recession firmly behind them, and are making the most of extremely high demand for new homes. However, smaller builders have yet to catch up as they struggle to secure the funding they need.”

“Since capital constraints are the main barrier to investing in the increased manpower or equipment needed in order to capitalise on new development opportunities, access to funding remains key to housebuilders’ growth,” he added.

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