A request works best when backed by threats. Housing Secretary Michael Gove appears to be on the verge of getting much of what he wants from the first stage of his operation to raise major sums to address the surfacing and fire safety crisis that has brought into sharp relief by the Grenfell Tower disaster in 2017.
Fifty-three developers have been invited, under penalty of being excluded from planning permission, to sign a building safety commitment which commits them to financing the costs of rehabilitation work on all medium and high-rise buildings that they have built over the past 30 years. The number of recalcitrant companies is likely to be less than one digit.
Barratt Developments was the latest big name to sign on Wednesday, expecting a retainer of £350-400million, although as he said the cladding and wall systems were approved as compliant at the time . Persimmon, Taylor Wimpey, Berkeley, Crest Nicholson, Redrow, Gleeson and more are also on board.
Signatories to the pledge have also promised not to make claims on the £5billion building safety fund which will sanitize buildings over 18 metres. Given that the money for this fund will be raised in part by a 4% levy on residential developer profits for the next 10 years, you can see why a few executives are complaining about paying twice. Well, yes, but that’s politics. Gove’s ‘polluter pays’ exercise was a welcome relief after predecessor Robert Jenrick’s farcical attempt to pass the costs on to tenants.
Likewise, however, there must come a time when the remaining bill must be spread more widely. This is the delicate stage at which Gove has arrived: how to finance work on so-called “orphan” buildings of 11 to 18 meters which have been built by foreign firms or which have subsequently gone bankrupt. The tally will also include buildings over 30 years old and those where local authorities have installed faulty cladding after construction.
The bill for this lot could be as high as £3billion, although it’s hard to be precise as the housing department is less than transparent about its modelling. The simplest option would be to hit big home builders with another levy, on top of the 4% annual levy which started this month, but that hardly seems proportionate. This is perhaps one of those very rare occasions when the home building industry – a place of big profit margins, big board bonuses and soft subsidies such as construction aid. purchase – deserves a modicum of sympathy.
As a report from the Housing Select Committee noted last month, the “polluter pays” principle poses two challenges: multiple polluters and untraceable polluters. On the multiple front, the list of non-developers who have contributed to fire safety failures for many years is long. In addition to manufacturers of poor quality coatings, the committee noted product suppliers, installers, contractors, sub-contractors, architects, building control and the redevelopment industry. They’ve barely been touched by Gove’s efforts to date.
On the untraceable front, UK developers might reasonably wonder how hard Gove is trying to track down and hunt foreign companies. The House Builders Federation estimates that UK homebuilders have built less than 10% of the estimated 8,000 buildings still in need of repair. Gove County promises full funding in due course. We’ll see what that brings, but if more demands and threats are needed, Gove should find new targets.
An introductory price that was always likely to have been a moonshot
Moonpig is the oddly-named company with a neat business model in the world of online greeting cards and gifts. The beauty of the card side is that the product can be printed when the customer orders; and the additional giveaways can be presented to a highly engaged audience. In the meantime, the e-commerce breeze should be favorable for years to come.
It was on this basis that Moonpig commanded a £1.2bn valuation when it floated last year at 350p per share. Buyers at this high price can’t complain about the subsequent news feed: Moonpig has updated its advice several times, including this week. The lockdown-driven revenue stimulus is inevitably fading, but all of the underlying long-term trends appear intact.
But, oh my, look what happened in the action: after hitting 480p, it’s now down to 211p. The moral of this tale is probably the oldest that the flotation hype machine should never be trusted. It’s not Moonpig management’s fault, but the general e-commerce frenzy of a year ago now seems overdone. The business will likely continue to grow for years to come, but £1.2billion for a greeting card business with a turnover of £300million was still likely to be too much, too soon.