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All about SME: an interview with Brian Berry

Words: Mark Smulian

Are smaller builders the answer to the nation's housebuilding crisis? Without a doubt, FMB chief executive Brian Berry tells Mark Smulian

‘FMB’ may be unfamiliar even to planners versed in the construction industry’s alphabet soup of acronyms. It’s fair to say that the Federation of Master Builders has rarely attracted attention in discussions about building more homes.

That changed with February’s housing white paper, which grasped the idea that the only way to increase output would be to harness the resources of small and medium-sized builders. These are the companies the FMB represents – 8,000 of them, 45 per cent involved in housebuilding, 1,500 who are active developers. 

The housing white paper’s logic commanded broad support: the eight dominant volume housebuilders have finite capacity and build and sell homes at a pace to suit themselves; creating the conditions for smaller firms to claim a significant share of housebuilding will get more homes built and more quickly occupied.

The FMB’s chief executive Brian Berry notes that in 1988, firms building fewer than 500 units a year constructed two-thirds of all new homes. By 2014, according to an FMB analysis of National House Building Council figures, the percentage of SME-built houses had collapsed to 30 per cent. Last year, says Berry, it was an even more dismal 23 per cent.

"Local plans tend to allocate large parcels of land that are not attractive to local builders who need small plots"

This dramatic decline is typically attributed to a blend of industry consolidation and the costs of land and planning. It occurred simultaneously with the introduction of the plan-led system in the Planning Act 1990, which took the initiative away from small builders.

Yet Berry remains optimistic. “There is a massive fall-off but no reason why we could not get up to building half of all new homes given the government’s target is 200,000 a year,” he says.

The white paper was what the FMB had been waiting for. “We had been engaging with ministers and civil servants about diversifying the housing market and seeking recognition that smaller firms face three main barriers to building. 

“The first is availability of land, because local plans tend to allocate large parcels of land that are not attractive to local builders who need small plots. The second is finance, because ever since the 2008 financial crisis small builders have struggled to get finance for housebuilding. The third is the complexity of the planning system.”

Surprisingly, the FMB supports the white paper’s proposed 20 per cent hike in planning fees. This, says Berry, “shows how desperate the situation has become that developers are willing to pay more to speed up the planning process. Because time is money in business”.

“We recognise local authority planning departments are under-resourced and we’d pay more for a better service.”

The cost burden

Nevertheless, the FMB argues that the planning system imposes unreasonable costs on smaller firms. Berry notes that a planning application needs attention not only to design but to voluminous policy documents, public consultation and section 106 negotiations.

A large firm can afford consultants to deal with these matters, but a small company cannot. Even if it could, it would not risk the money with no certainty of eventually being able to build.

"Government needs to decide whether it wants to tax the building industry to provide certain services, or wants it to build homes"

“Local authorities find it easier to engage with large housebuilders because they deal with one contractor and not several, which keeps their costs down,” explains Berry. “Also, their allocation of land in local plans tends to be larger plots because earmarking smaller developments takes more time and resources when planning departments are struggling for cash. Larger housebuilders find it easier to navigate the planning system.”

One solution would be a ‘red line’ process with permission in principle in an area. “Or else,” says Berry, “small firms will spend a lot of time meeting information requirements with no guarantee that development will be permitted.”

Planners and builders both want more homes but have different – sometimes conflicting – interests to juggle. Section 106 and the community infrastructure levy (CIL) are cases in point. “Members view both as a tax on development, which is what it is, expecting builders to pay for services that should be paid for by local government,” Berry says firmly. “It stops development going ahead and explains the decline of SME housebuilders. Government needs to decide whether it wants to tax the building industry to provide certain services, or wants it to build homes.”

He concedes that a contribution from developers to infrastructure that facilitates their projects is reasonable, but says: “It would help if S106 were more standardised and builders knew what to expect. It means larger companies are at an advantage as they know how to work the system and have the required expertise. Small builders will not be experienced negotiators able to talk with local authorities.”

CV Highlights: Brian Berry

Born: Tiverton, Devon, 1966
Education: Tiverton School, Devon (O and A levels), BA (Hons) History Bangor University, (1988); Law Diploma, College of Law, York (1990), Msc European policy, Bristol University (2000)

1988-1989 Teacher, Charterhouse Square School

1989 Made Freeman of the City of London

1990-1997 Parliamentary officer, Royal Institution of Chartered Surveyors (RICS)

1997-2000 Head of European policy, RICS Europe

2000-2004 Deputy head, RICS policy unit

2004-2006 Head of land and construction policy, RICS

2006-2007 Head of UK public policy, RICS

2007-2012 Director of external affairs, Federation Master Builders (FMB)

2008 Fellow, Royal Society of Arts

2012-present Chief executive, FMB

A loosening of the belt

Green belt, too, is a significant constraint, says Berry. “There needs to be a review of the green belt as it is stifling development and holding back housebuilders in many parts of the country.”

He continues: “People think it’s lush land but it can be scrub – not rich in biodiversity – so we ought to have a sensible review of this to see how best we build. Only 11 per cent of the country is built up, but to listen to some green campaigners you’d think we had no countryside left.”

Berry’s preferred solution would be to enable the organic growth of settlements through the kind of small sites suited to his members; but not ‘garden villages’. “The perception is they are sweet little developments, but in fact they are quite large and will be going to larger contractors, not local builders. Rather than building brand new settlements, work round existing villages and market towns and let them grow organically, and some could be guaranteed for local builders. I’d love to see that, and small firms would need to train local apprentices, which keeps money in the region concerned.”

Training apprentices, or indeed anyone else, is the construction industry’s Achilles’ heel. Except in times of deep recession, it has for decades been unable to recruit enough people in skilled trades such as bricklaying, plastering and carpentry.

“The skills shortage was not caused by Brexit, but has been exacerbated by it”

Even were planning problems solved, the industry could not quickly ramp up output as there are insufficient people trained to build homes. A solution of sorts had been found by importing skilled workers from the rest of the EU. Brexit will close off that route and there is alarm in the industry about its future workforce.

“The skills shortage was not caused by Brexit, but has been exacerbated by it,” stresses Berry. “Sixty per cent of FMB members report difficulty recruiting bricklayers, 58 per cent carpenters and all across the board site managers. With Brexit we are not going to be able to rely on [EU labour] and even if we allow a certain amount of skilled labour in, it will not meet our demand.”

This will force the industry into yet another attempt to attract homegrown talent, something that has been notably unsuccessful. Berry says better apprenticeships, efforts to attract female applicants, and the changing nature of building will all play a part.

“There is an opportunity to restore the credibility of apprenticeships, which over the last 20 to 30 years has declined. We need to develop quality 2-3-year apprenticeships and address the image of the construction industry, which too many people see as a ‘mud and boots’ dead end. 

“In fact it’s a very attractive career. Bricklayers are earning £60,000 a year in London and many FMB members started in a trade and now they are millionaires because they set up their own company.”

New faces, new skills 

“Unfortunately, the construction industry has not been particularly attractive to women,” Berry admits. “Only 2 per cent of manual trades people are women, so obviously there is a problem to reach out and say this is an attractive career. 

“I suspect there is a problem of stereotyping ‘boys to construction and girls to hair and beauty’ and some old-fashioned views that need to be challenged.”

But the construction process is changing. At one end, greater use of computerised design will demand different skills; at the other, the white paper’s endorsement of off-site manufacture also points to a different skills requirement.

Assembling houses on site from factory-made components would need a degree of skill, but not that of a traditional trade. Components would be cheaper and factory production would not be weather dependent. In theory this creates a stream of semi-skilled jobs and cheaper houses built more quickly.

“Off-site will play an increasing part and does offer a way to build much quicker, but it will not happen overnight and given the scale of the change we need room for everyone,” says Berry.

He notes that the growing demand to retrofit an ageing housing stock perpetuates the demand for traditional skills. Besides, quality remains a watchword for the FMB, which, Berry says with pride, has long since ceased to be a trade body that builders could simply pay to join. Applicants’ work is now independently inspected before they join and regularly reassessed to reassure the public and partners such as planners that its firms are reliable professionals.

The question remains though: can planners and developers find a way through the tangle of large sites, complex plans and planning gain to enable the nation’s smaller builders to deliver the homes we need?