Wednesday, 18 September 2013

Demanding supplies

£40k-a-year brickies, labour shortages, surging building materials imports and stretching delivery times. It all sounds like a bubble. Two housebuilders, Galliford Try and Crest Nicholson - both led by sagacious and candid chief executives - were both expansive on the issue during their Stock Market updates yesterday, despite the majority of their peers refusing to say the “B” word.

Bricklayers’ pay has surged by 20% in a mere six months, according to Galliford, while Crest said bricks, tiles and blocks were taking twice as long to deliver. “There’s a bit of a panic in the industry around bricks and the supply of insulation blocks, “ GT’s Greg Fitzgerald told today’s FT, while Crest’s Stephen Stone said his supply chain was “struggling to cope”.

This may temper - but far from cancel out - margin growth over the next couple of years, since the undoubted cause of the pressures, Help to Buy, will push up house prices while the three year scheme steams on. But labour and material pressures are likely to leech out into other building sectors and possibly impact the feasibility of commercial and other projects.

From a housebuilding perspective, however, it might help on a tricky political issue. The government expects the builders to expand housing production far more than they privately intend. The travails of the planning system remains the “prebuttal” of choice in advance of what is likely to become increasingly intense scrutiny. Now they can add supply problems. “Thank goodness we’re not looking to increase supply too much but more on increasing revenue,” Fitzgerald, perhaps unguardedly, let slip to the Pink Paper.

Tuesday, 17 September 2013

No laughing matter

“If Christopher Columbus had been a Liberal Democrat, he’d have discovered the Mid-Atlantic”. Ho, ho, ho … a joke that was resuscitated today during the Lib Dem Conference. Funny, but outdated: the last place a Lib Dem is likely to occupy these days is the middle ground, or ocean. Coalition deputy Nick Clegg appears to be following Cap’n Cameron to the West Atlantic, while man-overboard Vince Cable is paddling eastwards. A khaki-clad Paddy Ashdown would presumably be at home defending our South Atlantic interests. And fellow ex-leader Charles Kennedy would, no doubt, be equally happy propping up the Atlantic Bar (or any other one).

For once, skirmishes among the UK’s third (or possibly fourth) party have a bearing on the construction and housebuilding industries. The spat over economic policy between the right of the party, represented by Clegg, and the left, led by Cable, hinges largely on views of whether the government’s Help to Buy scheme would lead to “a new housing bubble” and the extent to which councils could borrow to build homes for rent. Similar divisions have emerged over infrastructure spending and the party’s grudging acceptance of nuclear power.

Whether any of this will matter depends on the direction of the inter-party horse-trading that is likely to ensue before and after the 2015 General Election. This could involve five or six possible permutations, including the coalition splitting up in advance, Clegg re-joining Cameron afterwards or the party being trounced and shuffling off, led by Cable, to join forces with Labour.

Cameron and Clegg back together (if the Tories don’t hook up with UKIP) could, I suspect, see the extension of Help to Buy beyond its 2016 cut-off (since the housing market would likely collapse were this crutch suddenly withdrawn) but the austerity drive affecting all areas of public construction would undoubtedly come back with a vengeance. Ed Miliband and Cable would be faced with the problem of how to “taper” away the impact of Help to Buy while avoiding a crash, possibly by lowering the £600k upper threshold, while cutting councils more slack to borrow.

This all looks unnervingly like the German way of doing politics. At least we will be spared the prospect of hearing Angela Merkel crack jokes on the campaign trail.

This post first appeared on my blog at on 17 September 2013