Dark Clouds for SME developers

However, the current picture is increasingly challenging for SME developers writes COO of Fruition Properties, Parul Scampion in PBC Today.

Pandemic-driven supply chain and labour challenges, mixed with a costly and protracted planning system, mean that SMEs are facing strong headwinds.

Unlike the bigger operators, SMEs simply don’t have the deep balance sheets required to ride out long delays without consequence. Looking back, the industry lost around 30% of SME developers in the 2008 financial crash – the majority of which didn’t return. If the current situation continues, I fear the sector may be heading towards a similar outcome with its downstream impact on housing supply.

Supply chain issues

The entire supply chain is struggling with staff and materials shortages. This is incredibly frustrating, particularly on sites that are so close to practical completion with just a few outstanding items required.

Bulb’s recent unexpected collapse into administration has left us scrambling to find another supplier for energy meters for one of our sites, while at another, our contractor’s cleaning company has been short on staff which has caused practical completion to be delayed.

Like the SMEs they work for, these contractors are often small firms themselves and don’t have the financial means and staff to absorb these obstacles or forward-buy. As I write this, fresh concerns regarding the Omicron variant of Covid-19 will not be making for comforting reading around labour concerns.

Where our contractors can source materials, their price continues to rise and is forecast to do so well into 2022. Developers are having to build in this inflation into future sites, which risks making some projects less viable. Contrary to some beliefs, developers – particularly SMEs – don’t have infinite margins to play with.

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