BMF Policy Manifesto 2014/15
The supply chain and Government together
www.bmf.org.uk
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Introduction The Builders Merchants Federation... The Builders Merchants Federation (BMF) is the UK trade association for businesses in the building materials distribution sector. We represent merchants and manufacturers of construction materials, home improvement products and renewable energy systems. Our merchant members, which include FTSElisted national companies, mid-size regional chains, specialist suppliers and small independent firms serving their local market, sell to trade professionals and to retail customers. They play a key role in the building supply chain, providing an efficient route to market for building materials manufacturers and a vital source of credit to their customers.
A MANIFESTO FOR MEMBERS
...and what we represent The BMF acts to ensure the voice of merchants and their suppliers is heard by policy makers both at national and local level. Our members operate in one of the UK’s key economic sectors. Construction is a major barometer of the nation’s economic success, accounting for around 10% of UK employment with almost a fifth of all UK private sector businesses operating in this industry. For the Government, supporting construction in general, and housebuilding and home improvement in particular, can quickly create a large number of meaningful jobs in every constituency. Jobs that will benefit both the local community and the national economy.
The BMF has over 450 members who together have combined annual sales in excess of £12.5 billion, and employ over 80,000 people. The BMF’s 300 builders, plumbers and timber merchants trade from over 2,500 outlets throughout the UK.
5 things to remember about BMF members ❶ Linking the Supply Chain Merchants are the single most efficient route to the construction market, distributing trade essentials and value added products from the quarry, factory or sawmill to the site where they are used. BMF merchants expertly manage the delivery of smaller, mixed or repeat loads to site, acting as local consolidation depots, breaking bulk and providing the ‘last-mile’ link in the supply chain. ❷ Bankers to the Trade BMF merchants offer the simplest, most effective source of credit for SME builders and allied trades working in housebuilding and home improvement. ❸ A Trained Workforce BMF members promote individual and organisational development at every level. The BMF is their major
training provider offering formal qualifications from NVQ Apprenticeships to a Postgraduate Diploma for senior managers, as well as specialist skills training and product knowledge. ❹ Educating Customers BMF merchants and manufacturers take pride in explaining new products, applications and modern methods to their customers. The SME trades also look to their merchant to help them understand changes in legislation, Government policy or financial aid. ❺ Independent Advice BMF merchant staff take a wider view of the products they sell; an important USP. They possess a working knowledge of the full range of solutions available and give unbiased advice about what best suits the customer’s project.
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Building Prosperity Construction 2025, the industrial strategy for Government and the construction industry working in partnership, sets out ten joint commitments designed to reduce costs and improve outputs. A core commitment is to create conditions for construction supply chains to thrive by addressing access to finance and payment practices.
Lending for growth One of the strengths of the building trade is the low entry cost for start-ups, which allows small firms to access the market and promotes competition. However, the same small businesses face more difficulty in accessing bank finance than any other sector. Despite the introduction of schemes such as Funding for Lending, the Enterprise Finance Guarantee Scheme and the arrival of the British Business Bank, lending to our industry is still seen as risky. The lack of readily available finance affects not only small building firms, but also the merchants that supply them. Many BMF members cite instances of short-notice tightening of overdrafts, unreasonable demands for collateral or outright rejection of finance. Yet bankers have an economic obligation to lend. Our industry needs improved availability of readily accessible finance, lent responsibly to credit-worthy borrowers at decent rates enabling builders and allied trades to flourish.
Net lending to SMEs fell by £1.2 billion in December 2013 - four times greater than average monthly decreases of £300m over the previous 6 months. Source: Bank of England
A MANIFESTO FOR MEMBERS
Keep Cash Flowing Late or non-payment is a long standing issue in construction with some main contractors moving to 120 days as a default position. Holding onto money impacts the entire supply chain and hampers economic recovery. This must be confronted in law by enforcing the Prompt Payment Code, currently a voluntary undertaking with no penalties attached. The Government no longer appears ready to name and shame firms who are slow to pay. But they must go further, for example, by elevating the issue to board level and requiring mandatory disclosure of corporate payment practice. Unless the Prompt Payment Code is enforced, we doubt the majority of b2b payments will be made in less than 60 days, twice as long as the normally stated terms.
57% of SMEs have waited more than 90 days for a late payment. 72% waited more than 60 days. Source: Sage UK Ltd
5 ways to get cash flowing through the industry: • Encourage bank lending to builders for operating of projects • A more coherent programme of Government schemes to help SMEs raise finance • Extend the BMF Enterprise Finance Guarantee Scheme beyond initial trial period • Enforce the Prompt Payment Code • Mandatory disclosure of payment practice in Auditor’s Report
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Housing Supply The UK needs 2.5 million new homes by 2025. That means building around 250,000 homes each year for the next ten years to keep up with new households being formed. Yet we currently build fewer than half the number required.
Demand for Homes We welcome the Government’s actions to reinvigorate the housing market through initiatives such as the extension of Help to Buy and the housing development areas announced in the 2014 Budget. These recognise both the need for more homes and the importance of construction jobs to the local and national economy. Despite figures showing housing activity increasing, more action is needed to meet demand for homes for sale and for rent. However, demand-side policy must be pursued in a coherent and sensible manner to avoid another unsustainable property bubble.
There are 3.5m people aged 20-34 living with their parents – a 25% increase since 1996. In England there are 1.8 million households on housing waiting lists. Source: Office of National Statistics and Shelter
A MANIFESTO FOR MEMBERS
Planning Reform The Government has made significant changes to planning and development policy since May 2010 shifting the emphasis from planning being only about development control, to a system where development is enabled and managed. Some changes were more welcomed than others, but in general, moves to make planning permission less complex will benefit BMF members and the whole housing market. At a local level, how these policies are interpreted and implemented for brownfield sites and greenfield land is critical. There is an overriding need for Government at all levels to get it right. If not, test cases will end up in the courts, causing confusion and delay.
England faces a shortfall of 1 million new homes by 2121. Source: Countrywide plc
5 ways to accelerate new homebuilding and home extensions: • No new policy initiatives, allowing planning authorities to identify housing needs, maintain a viable 5-year land supply and confirm their Local Plan • More discretion and flexibility in planning fees and planning gain taxes (esp. for self and custom build) • Fulfill commitments to streamline regulations and standards, making more sites developable • Advance warning and a clear timetable should taxpayer-backed financial support for new build be reduced or ended • Extend changes to Permitted Development Rights beyond the initial 3-year period
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Upgrading Homes Building Regulations ensure new buildings are energy efficient and comfortable to live in, but existing homes comprise the bulk of the UK’s housing stock and many are poorly insulated and costly to heat. Encouraging homeowners and landlords to upgrade older housing will make them more comfortable to live in, give an economic boost to the building industry and help Government to achieve carbon reduction targets.
Thermal Efficiency The Green Deal has proved so complex and expensive that few consumers have taken it up. In its current form it will not deliver its aim. Are there other options? Forcing homeowners to upgrade the thermal efficiency of their homes – as landlords must do by 2018 – is unlikely to work. A carrot rather than stick approach is required. Reducing Council Tax bands and/or Stamp Duty rates to reward energy efficient homes is one approach. A reduction in the VAT rate is another. The EU is suing the Government for lowering VAT on specific energy saving measures, but allows member states to permanently reduce VAT to support economic growth. The Government must defend the current reduction, and consider lowering the rate of VAT to 5% on all domestic refurbishment work, boosting work for SME builders and saving hundreds of pounds on energy bills.
85% of homeowners would stretch improvement budgets by around 10% for energy efficiency and nearly 40% to replace windows. Source: Energy Saving Trust
A MANIFESTO FOR MEMBERS
Water Utilisation Using water wisely and reducing waste, saves water, reduces energy and utility bills. BMF merchants and manufacturers are supporting the introduction of a voluntary labelling scheme to help consumers identify the water efficiency of taps, showers, WCs and baths, starting summer 2014. Like the Energy Efficiency Label found on white goods, it will help consumers compare products, like for like, and see which offer the greatest water savings. Since 1970, water use has increased by 1% each year. Government and industry have a joint role in educating consumers to conserve water supply and uphold water quality.
Taking showers is the biggest use of water in homes (25%) with a staggering £2.3 billion spent on heating water for showers. Source: Energy Saving Trust
5 ways to achieve energy efficient homes: • Streamline Green Deal; incentivise homeowners • Lower Council Tax / Stamp Duty for energy-saving homes • Defend 5% VAT for energy-saving goods • Cut VAT to 5% for all housing RMI • Mandatory use of Water Label scheme
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The Merchant Business
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Onerous and poorly-written regulation makes it harder for BMF members to run their businesses.
road use fees and charges, plus the added issue of kerbside waiting and loading restrictions.
The BMF exists to foster business-friendly conditions for its members. We talk regularly with Government at all levels, providing policymakers with credible and convincing input to inform strategy, policy and funding options. And we support members by identifying detrimental impacts and inconsistencies within consultation papers; by challenging erroneous assumptions or flawed proposals, and giving alternatives to help shape better policy.
Operating costs are rising, but Government must understand that higher costs are hard to pass on in the early stages of economic recovery.
Compliance, inspection and enforcement – the way in which local authorities and others interpret and apply regulation – can be a very real issue for members. Expanding the Primary Authority scheme may deliver more consistency here. Our members’ business is essentially supply chain logistics: making, distributing, stocking and fulfilling customers’ orders. Transport is the second highest operating cost, after employment. This means driver and vehicle operating costs, fuel prices and duty, BMF members cover a broad church. They include 36 of the top 40 UK merchants; yet 54% of merchant members turnover less than £5m a year. Source: BMF
5 ways to help the building supply chain: • Improve quality of impact assessments prior to policy decisions • Expand Fuel Duty Discount to more rural areas • Keep business and employment taxes as low as possible • Expand Primary Authority for consistent regulatory advice/enforcement • Reform business rates before next rate revaluation
SUMMARY The construction industry is crucial to the UK’s economy. It creates jobs in every constituency, it delivers energy efficient homes and it accounts for 6% of the country’s economic output (GVA). BMF members are a vital link in the building supply chain. A thriving construction industry is in all our interests. 1. We urge Government – of whatever colour – to think in longer time frames. We ask current ministers to stick to their declared priorities. It’s wasteful to force the industry to react to sudden changes in policy or spending. We ask opposition parties to signpost well in advance, policy areas where they plan to change direction or funding. 2. Help builders and allied trades to flourish and grow by improving the availability of readily accessible finance, and by stamping out the shameful late payment practices prevalent in construction. 3. Promote a planning system that supports the sustained building of new homes, that people want to live in, built where they want to live. 4. Rapidly upgrade older housing stock and cut heating bills by lowering the tax burden of RMI and providing tax breaks for householders who invest in energy efficient home improvements. 5. Reduce the red tape that can tie up SME businesses, wasting time and adding to operational costs.
To find out more about the BMF and to discuss any aspect of this manifesto please contact either: John Newcomb Managing Director Emal: john.newcomb@bmf.org.uk
Brett Amphlett Policy & Public Affairs Manager Email: brett.amphlett@bmf.org.uk
BMF Head Office 1180 Elliott Court, Coventry Business Park Herald Avenue, Coventry CV5 6UB Tel: 02476 854980 Fax: 02476 854981 Email: info@bmf.org.uk
BMF London Office The Building Centre, 26 Store Street London WC1E 7BT Tel: 0203 581 1313 Fax: 0203 602 4747 Email: info@bmf.org.uk
www.bmf.org.uk