A quarter of small and medium sized (SME) building firms have missed out on contracts because they can’t secure vital funding, with many claiming banks and building societies are actively discriminating against construction companies, says the Federation of Master Builders.
FMB latest figures show the Government’s Funding for Lending scheme (for more about the scheme, click here) is failing to support construction. Lending to builders by banks fell significantly in the last three months of 2012. The FMB has urged ministers to act, citing the results of its major survey of more than 1,000 member firms, which clearly show the ongoing restriction of finance to SMEs in construction.
More than 40% of construction SMEs surveyed said they had found it even harder to gain access to finance in the past two years, while 43% reported that credit is more expensive than two years ago and 25% had seen the price of credit from the banks increase.
The survey also confirmed widespread fears that banks are actively discriminating against construction firms, with 25% of respondents reporting they had lost work as a result and 16% saying they had been refused requests for credit by a bank that had previously considered them trustworthy – explicitly because they are in construction.
Of those surveyed, a quarter reported they had lost business or had to abandon plans for growth or investment because they were unable to raise the necessary funds, and 18% said the number of peope they employ had fallen as a direct result.
The FMB has now written to Michael Fallon, the Business & Enterprise Minister, calling on him to end this discrimination against construction firms and boost the beleaguered sector.
Brian Berry, the FMB’s Chief Executive, said: “What we are seeing is that otherwise viable and successful firms cannot access suitable finance for business operations, including buying new equipment and plant. This is having a serious knock-on effect on jobs and growth in the sector.
“The fall in net lending by banks under the Government's Funding for Lending scheme comes as no surprise. SMEs and the construction industry are continually touted as the drivers of economic recovery but without access to finance the sector will continue to decline.
“The Government needs to prevail upon banks not to discriminate against viable and successful firms just because they work in the construction industry. If the Funding for Lending figures don't improve significantly in the first quarter of 2013, the Government needs to urgently explore alternative vehicles to improve the flow of finance to construction SMEs.”