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.

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