Members of the UK200Group of independent accountancy and law firms have today commented on a Freedom of Information (FoI) request that shows that the construction industry have only taken £1 million of finance from a potential multi-million pound pot to fund the creation of new homes.
The FoI request, submitted by the BBC to the Homes and Communities Agency, showed that only £1m of the £525m Builders Finance Fund (BFF) had been taken up by builders since it was launched by the Government in April 2014.
The fund was created to accelerate hundreds of housing projects that had been stalled by the economic slowdown. But so far just two projects have benefited from the BFF, which is due to end in March 2017, despite high levels of initial interest from the industry.
Jonathan Russell, Partner at UK200Group member firm ReesRussell:
The Builders Finance Fund (BFF) would have been a great idea if the reason for building projects not progressing was purely down to financing. That the system is cumbersome, complex and time consuming is an issue, but fundamentally the problem of the so-called ‘stalled projects’ is more about viability than finance.
Many projects were only viable or sufficiently profitable when we had a rising housing market and many of them are now just not profitable enough to warrant progressing at this time. Many developers can afford to sit on land banks until the market is right to develop them at the right margins, but they are not prepared to develop them at lower margins as they don’t necessarily know where there next development site might come from. When there is only a finite resource, in this case the number of development sites, timing of use is very often more important than anything else.
Duncan Montgomery, Tax Partner at UK200Group member firm Whittingham Riddell:
This is a new system that, in order to deliver what it needs to, has to negotiate the legal position on individual sites and companies who have differing circumstances, because of that the legal paperwork is complex and more bespoke, which requires funding and time. Up front provision of a legal pack from Government would be enormously helpful so that applicants can be ready before the process starts.