More than half of SME builders reported the planning system as their biggest barrier to delivering new homes, according to the Federation of Master Builders, FMB, annual survey.

Respondents cited ‘inadequate resourcing’ of planning departments as the main reason for delays in applications followed by poor communication.

FMB chief executive Brian Berry said: “For small builders, the survey is clear that the system is too complex and costly. Communication from local planning authorities is also poor. Without changing this, planning issues are likely to loom large as a barrier for some time.”

Extra expense due to planning delays was the most significant cause of additional costs. Out of the 127 members surveyed only 12 per cent had a ‘high degree of certainty’ in the planning process.

Nearly half, 45 per cent, had medium certainty with a third, 32 per cent, seeing a low degree followed by 11 per cent with a very low degree of certainty in the planning process.

The second biggest barrier was restricted mortgage availability with just over half, 51 per cent, indicating this was a problem.

Buyer demand was at its lowest since 2015, when the survey began recording this data, with an average score of two out of five, with five being very good and nought being very poor.

“This issue has seen a rapid rise over the last two years, reflecting the devastating impact the wider economy can have on the small house builders. With many consumers choosing not to take out mortgages it would appear the market is only getting smaller, resulting in less homes being built,” said Mr Berry.

He added that this would be tough for SMEs whose housebuilding market share has dwindled from 40 per cent more than 30 years ago to just ten per cent now.

Nearly a third of respondents, 63 per cent, said small site opportunities are decreasing, down from 82 per cent last year, with five per cent reporting that the number is increasing.

And 60 per cent reported obtaining planning for small sites was worsening with 59 per cent believing national planning policy framework requirements on councils to identify sites wasn’t helping.

“Lack of available land is also frustrating small builders and without proper incentives for local authorities to promote small sites it seems unlikely there will be much change,” added Mr Berry.

Interest rate charges hold SME developers back

Access to finance received the lowest rating in six years of just under two out of five with interest rate charges on new loans quoted as the most significant issue restricting the ability to build new homes.

More than half, 53 per cent, cited self-build or custom contracts as the most popular source of funding for a new project.

Brokers Hank Zarihs Associates said there were still development finance lenders out there offering a property development mortgage at a good rate.

Nearly all respondents, 94 per cent, said it had become more expensive to build over the last 12 months. More than half, 53 per cent, said it had become 20 per cent more expensive with one in five saying it was 30 per cent more expensive per site.

Just under a quarter, 24 per cent, plan to grow their on-site workforce over the next year with 57 per cent planning to keep roughly the same numbers and 12 per cent planning to decrease headcounts.

Half of respondents said they would be upskilling their workforce with 36 per cent reporting they would hire one or more apprentices down slightly on last year’s 40 per cent.

Over 70 per cent of respondents said they were not confident about the new rules on biodiversity net gain which go live next year. More than half said there would be increased costs associated with future homes standards in 2025 when gas boilers can no longer be installed.