Alternative finance is getting construction moving

Construction output fell in February at the fastest pace in more than three years – despite a marginal expansion in house building.

Duncan Kreeger MS blog

The latest Purchasing Managers’ Index for construction, an indicator of the sector’s health, showed output dropped to an index of 46.8 in February – the fastest fall since October 2009.

Commercial projects fell at a worrying pace. The largest sector of the industry at 22 per cent, they declined at the fastest rate.

The reason: it’s been so difficult to get funding for commercial projects, as any broker will tell you. Many SME building firms report that banks and building societies are ‘actively discriminating’ against them.

The situation has become so severe, that the Federation of Master Builders has called upon the government to make a change. One quarter of members reported that they had missed out on projects because they couldn’t get the funding, and 18 per cent said they had to cut back on their staff numbers as a direct consequence. It’s causing real damage.

Small businesses and the construction industry are constantly put forward as key components to economic recovery. But the economy would have staggered back into a triple dip recession, had the services sector not offset downturns in construction and manufacturing.

Fortunately, there’s a solution to the problem – short-term secured loans.  Alternative finance grew over 50 times quicker than mortgages in the last quarter. Bridging provides fast investment in innovative projects that are struggling to get funding from banks and building societies. Peer-to-peer bridging is even more flexible.

And commercial loans are growing as a proportion of all bridging loans. In fact, commercial bridging is 99 per cent larger than this time last year, according to our recent index.

Rome wasn’t built in a day, but alternative finance is getting construction moving.