Wednesday 3 December 2014

The Big Day for Construction

It is an interesting phenomena that in the UK construction make-up of the economy is only around 6.5% of GDP.

George Osborne wears a lot of hard hats for that  - yet you never see him volunteering in a call centre or working in an office doing some marketing services work - both of which are services industries which account for around 70% of GDP!

Today the Government has some crazy idea about forcing housebuilders to build; as if developers are not going all out.

Here are some timely anecdotal tips:

Berkeley Homes is run by the most canny real estate investor in the UK - Tony Pidgley. He has long been trying to build as many houses as he can whilst the boom last and running down the land bank of his company whilst prices for land are so high.

Also, a friend of mine in the construction industry has noted that overall capability in the sector is well down on what it was in the 1990's. Major Government schemes slowed and also public sector work had crowded out private sector early in this century - a final hit was with the Financial crash. All the major companies are now smaller and many are in financial trouble. Even big players like Balfour Beatty have had a bad year; their shares are down over 30%. Where these companies like Laing O'Rourke are doing well is in the Middle East, not in Blighty.

Against this backdrop of housebuilders working at capacity and commercial construction struggling with demand overall we have the Government claiming it is going to beat them up - by trying to out compete them.

Where are the businesses going to be to complete these houses then? Where are the contractors? What price are they going to charge the government when their issue is supply chain challenges and escalating costs - not lack of demand?

I fear another Government solution has been found for the wrong problem at exactly the wrong time in the market.


dearieme said...

"phenomena" is plural.

Steven_L said...

you never see him volunteering in a call centre

"Hi there Mr Jones, my names George, I'm calling on behalf of British Gas to make sure you're getting the cheapest possible energy tariff"


"I'm sure it's important to you as an energy consumer that we keep your bills low in the long term"


"And that you have a reliable supply that won't leave you without power in the winter"


"Fantastic, what I'm going to do for you today is add something called the energy company obligation to your account. This will save you money while ensuring that we keep the lights on and provide suitainably lower bills until 2040."


"Can I please ask if you agree with us that cheap solar power would be a good thing?"


"I'm glad we agree, as today I'll be adding something called the feed in tariff to your bills. This will save you money in the long run by ensuring that your wealthiest neighbours invest in solar energy, one day reducing the cost so that we can all afford it."


"Right just to recap, today we've added the ECO and the FIT to your account. They won't appear on your bill, and we promise they will save you money in the long term and prevent you from having no heating in the winter."

"And these are free, right?"

"You'll only pay for the units you use Mr Jones, and at our new rate taking into account the ECO and FIT I've added to your account today."

"But I'm not paying anything extra for these?"

"These won't appear on your bill Mr Jones, you'll just pay the standard unit rate per kilowatt hour, which we guarantee to be our best deal. Have a great day Mr Jones, I'm going to let you get back to what you were doing so I can get on with helping more people like you."

Nick Drew said...

scary, Steven

dark arts, eh?

Demetrius said...

Actually, there is no real shortage of housing, just a great deal of underuse and gross distortion of the market.

CityUnslicker said...

Demetrius - that is a half truth at best. There is housing in ex-heavy industry areas where no one wants to live. this is not underuse, it is mis-allocation.

I cant belive the stamp duty decision today - tax cuts for the market which is in a bubble. lunacy.

Sandalista said...

Not lunacy if you want the bubble to continue along with the feelgood factor.

GO is as much of a financial genius as GB.

Its continues the transfer of wealth from the young to the old / investment funds.

All land should be taxed to the max and income tax, VAT etc reduced or removed.

Suffragent said...

Here we go again with Governments Dodgy Profit.
Service industries. The answer is in the name, you can have all the jugglers and bunting specialists you want but if there’s nobody taking pies to the market, there aint no market. If there’s no market, there’s no customers to skim.
Adding to yesterday’s post (sorry always late to the party). Let Sweden show the way. All the goody goody parties left and right, didn’t want to play with the nasty racist party (got to be racist because they questioned immigration among other things). Problem is, more and more people are becoming racist (no matter how hard the goody goody parties and associated press told them it wasn’t nice and they should share their sweeties) and the nasty party got a good chunk of the vote. They now hold the balance of power but nobody can speak to them out of fear of association. So there will have to be a new election.
As I’ve stated before it’s not, who do you vote for but how we rid ourselves of these parasites. Not an easy job so how do you improve your life in the meantime? Know your neighbours?
ND sorry for not responding previously but I really admire you artistic ability, to nail a character in a few simple lines is truly an art.

Suffragent said...

Love it

James Higham said...

My builder mate has no shortage of work but then again, that's up north.