Output in the construction industry has fallen in 2016 but small and medium sized businesses (SMEs) in the sector are entering the new year with confidence, displaying strong levels of optimism for the 12 months ahead. 

Data from the SME Growth Watch Report report indicates just over half (51%) of SMEs in the construction sector are feeling optimistic about the long-term economic prospects for the industry over the next 12 months. In addition, over a third (34%) are likely to invest in capital, people or services to facilitate expansion, either domestically or overseas, over the next 12 months.

Although the percentage of construction SMEs that intend to invest in their business is lower than some other industries such as real estate (59%) and manufacturing (56%), it is positive to see smaller construction businesses moving forward with growth plans.

Taking a look across the whole of the UK, nearly half (49%) of construction SMEs are also feeling positive about the economic prospects for the region in which their business operates.

Cause for optimism

From our experience working alongside SME housebuilders, the continued demand for housing is a key factor in fuelling this optimism. According to government figures, in the quarter to September, housebuilding starts were 6% higher compared to the previous three months and 10% higher than a year ago. At the same time, the latest RICS forecast points to further increases in house prices next year, with a predicted average rise of 3% in 2017.

We understand that in order to make home ownership more affordable, construction of the right type of properties needs to increase and SME housebuilders are key in fulfilling this need. We welcome recent government pledges to support the building of more homes. In order to succeed, SME housebuilders need support from the financial sector to secure the investment they need to take projects forward.

We believe specialist banks can provide flexible, fleet-of-foot decisions, helping to ensure smaller housebuilders don’t miss out on that next development deal. By providing consistent support to SMEs in this sector, we expect to see this translate to economic benefit across the UK.  

Robert Grigg, managing director of property finance at Hampshire Trust Bank