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.