Low volume house-builders recover more slowly
They say a rising tide floats all boats, but when it comes to house-builders, it seems, the bigger boats are riding the crest of a higher wave.
While the high-volume house-builders have been raking in record profits, medium sized and smaller players have not managed to benefit from the improved market conditions to the same extent.
Analysis by finance website Funding Options says that large house-builders’ margins average 11.7% but small builders are making only 7%.
Large house-builders (turnover of £250m+) saw their profit margins hit an average of 11.7% for 2015, compared to their 2007 peak of 11.2%.
At the SME end of the market (turnover below £25m), profitability for 2015 averaged 7% – well below the 12.2% that they posted in 2006.
However, as the graph below shows, the smaller firms never sank to the depths that the big ones did during the last recession.
Only 27% of homes in the UK are now built by low volume house-builders (those who build fewer than 500 units a year), compared with 44% in 2008, according to research by the National House Building Council.
Funding Options said that smaller firms were struggling to secure finance and were restricted in the projects that they can take on.
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This article was published on 18 Jan 2016 (last updated on 18 Jan 2016).