How Government initiatives impact SMEs in construction

Another week has passed away and I actually heard someone say “it’s nearly Christmas” – how depressing, but even more so was then realising my wife has already started Christmas shopping! Depressing resonates in the industry at the moment with the consultancy framework changes and the affordable housing exemptions.

The consultancy framework sounds quite glamourous, surely most things do with consultancy in the title but the government’s troubled framework is about to be launched with 23 opportunities valued at approximately £2.9bn. Now the change of the framework from 6 to 23 is apparently to aid SMEs which I don’t totally get as they will still be competing with the large behemoth firms now I guess the upside would be boutique specialist firms that can really impress on a small section of the framework.

The whole framework has been fairly comical – first UK SBS left the management to CCS after controversially axing the procurement process and then there was the high court challenge by Turner & Townsend and then heavy criticism for no SMEs being awarded a place in the first round.

The framework will be split into 23 lots - one lot covering the whole of the UK, two covering overseas work, and 20 covering four individual disciplines across five UK regions. The current procurement timetable expects the framework to go live in March 2016 - nearly three years later than originally planned.

So that’s point one but then we have the small sites affordable housing exemption that was recently thrown out by the High Court. Building some sites requires a level of income, particularly a large number of small developments built by SMEs and to suddenly find out a certain percentage of the site needs to be affordable renders the site uneconomical! This scenario happened when recently the High Court made a landmark ruling that overturned the small sites exemption from affordable housing provision. It was a strange ruling given developments of 10 homes or fewer were excluded from the requirement to provide or contribute to affordable housing.



It does come as a somewhat humiliation to the DCLG who did inadequate consultation on the affordable housing provision. The small sites exemption was intended to speed up the planning process for housing, support local builders and reflect the difficulty of stacking up smaller developments. This ruling effectively renders many sites to potentially be abandoned.



So in the modern day where we should be encouraging our #SMEs there are two examples here of how they suffer. The framework at least has changed and will potentially help but as for the wider market for house builders there will need to be a revisit to whether a site would be viable without exemption from affordable housing.

 

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend

Lee