Number of house builder insolvencies up 75% this year

In 1988, SME builders constructed 39% of new homes and by 2020 this had dropped to 10%, the research found. 

Matt Howard, head of restructuring and recovery at Price Bailey, said: “Many listed house builders saw profits surge during the pandemic as buyers took advantage of low interest rates and a stamp duty holiday. Their success has masked growing financial distress among smaller house builders. 

“Many house builders are tied into fixed price contracts, which quickly become under-priced as inflation eats away at margins.

“This has become an acute problem over the past year as construction cost inflation has risen sharply, making many contracts unviable. Larger builders with multiple sites can offset losses from under-priced developments, but small house builders with a single site may have no option but to deliver houses at a loss.”

Price Bailey also highlighted the impact of nutrient neutrality guidance issued by Natural England in March 2022. 

The advice aims to reduce adverse impacts to protected wetland habitats resulting from nutrient enrichment caused by construction activity. 

Inside Housing reported in June that around 120,000 new homes are being delayed by the rules. 

Mr Howard added: “Smaller builders find it harder to navigate the growing risk and complexity of the planning system. The nutrient neutrality requirements are yet another obstacle which disproportionately hinders smaller builders.

“Listed builders are generally able to mitigate planning risk across multiple sites, but when smaller builders encounter planning delays on one or two sites, it can mean the difference between a year of growth and a year of contraction.”

Mr Howard called on local authorities to do more to work with small builders so that small plots of land can be identified, developed and quickly brought to market.