Following Rishi Sunak’s recent Spending Review announcement, which took place on the 25th November 2020, we at MSP Capital are certainly keen to see how the Government’s spending proposals will impact and hopefully benefit the small and medium-sized property developer. MSP Capital have a vested interest as small and medium-sized developers are our core client-base when it comes to providing development finance.
In outlining the Government’s spending plans for the coming year, the Chancellor noted that the Review’s first priority was getting the country through coronavirus, its second was stronger public services, with its final priority to deliver ‘record investment plans in infrastructure’. He announced that, to build housing, the Government was introducing a £7.1bn National Home Building Fund, on top of its £12.2bn Affordable Homes Programme. Mr Sunak also announced a new fund, a Levelling Up’ fund worth up to £4 billion which any local area will be able to bid directly to fund local projects.
Switching plans and getting involved instead with local projects coming to life
Mr Sunak’s Levelling Up fund provides opportunities for each area of the UK. He mentions earlier in his speech the Government’s determination to regenerate people’s pride in their towns and cities to the point where locals say: ‘yes: our community – this place – is better off than it was five years ago.’
His commitment to focus local developers on their communities and making giving funds available for them to do so, will provide definite opportunities for developers who are flexible to change and happy to develop different aspects of building.
Outlining it simply, he stated that these projects must have real impact, be delivered within this Parliament and they must command local support, including from their Member of Parliament.
Leaning on their opportunistic approach and that of countless other clients, we know that if you can take the skills and vision that you have and use them to create opportunities that are relevant with the community and in-line with government provisions you can move forward in a strong manner in 2021. Even if the entire amount isn’t funded by the Government, it’s highly likely that we can assist with topping up the development finance aspect or co-ordinating an essential bridging loan where needed.
Looking at his statement overall, what do these changes mean to SME property developers?
It will remain to be seen whether this latest round of spending announcements will directly impact the small and medium-sized developer.
As has been the case for as long as I can remember anyway, there has always been the age-long issue of supply and demand. Indeed, it was noted by the Chancellor that at the moment, traditional house builders do not have the capacity to deliver on the 300,000 new homes a year target, which is therefore going to further exacerbate the ongoing problem.
This constant imbalance in UK housebuilding is though something the Chancellor is hoping his spending plans will help resolve by encouraging more Investors, Developers, Councils, and Housing Associations to deliver upon the much needed additional housing stock. Where we remain a little skeptical, is that I’m sure we’ve heard it all before. Over past years any Government-led spending plans have always seemed to be weighted more toward the UK’s biggest house builders, as opposed to offering any real benefit to SME property developers who also play a vital part in helping deliver the housing targets.
On a more positive note, we are confident that these changes will bring some much needed positivity to the property market as we head into 2021.
MSP Capital will certainly continue to have an appetite to provide the required funding directly to the SME property developer to help achieve these targets.
As a slight aside, ever since the recession in 2008, our team at MSP Capital have witnessed dramatic changes in the property lending market, with the traditional high-street Banks adjusting their appetite to risk, through lowering their LTV lending parameters for just one example. Indeed, we have seen over time this traditional route of funding retrenching from the market in providing the much needed development finance to those smaller and first-time developers. This has though led to the rise of the alternative lending industry who have helped plug the gap, and indeed who now offer a vital line of funding to our UK SME property developers, and will continue to do so.
During 2020 especially, we have seen our role as capital lenders as providing solutions through finance to see projects be completed and new visions to come to life. In effect we see our role as essential to help keep Britain building. The relief and renewed drive to persevere has been tangible with clients over the past few months and it’s incredible to be in a strong position to lend with assurance.
If you are one of these SME property developers exploring your current property development finance options, please do give MSP Capital’s experienced Business Relationship team a call.