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A Construction Industry View

If greed is good, then the construction industry is a great place to be virtuous. The typical director takes home £400,000 a year more than he did in 1995, while employees’ wages have gone up nearly 75%. Indeed, the past decade or so has been extraordinarily kind to construction. Margins across the industry have more than doubled. Even contracting margins, which look so lowly when compared with the rest of British industry, have risen from an average of 0.8% to 2.4%.

The rise in salaries just goes to show the limited supply of skilled labour in the UK. The top 25 companies now all pay an average of more than £40,000 per employee, compared with just three firms four years ago.The stories of City slickers turning their hands to plumbing because of the day rates may be exaggerated, but there is undoubtedly a hunger for good-quality people in the industry.

Geoff Allum, analyst at KBC Peel Hunt’s support services and construction team, says: “What is holding the industry back is capacity. We don’t have the sufficient capacity to do all the jobs the government wants to get done, particularly with the Olympics looming. “I suggest we encourage more qualified overseas people to work over here. There are a lot of Poles running our bars, why not our projects?”

[Gordon] Brown has put housing at the top of his to-do list. One fear is that he will try to squeeze yet more affordable housing out of the private sector, eating away at its profits. The margins may be double those of 12 years ago, but that growth was vital for housebuilders to gain some credibility in the City. Now, as the housing market tightens, that credibility could wane and affordable units would be the culprit, as far as housebuilders are concerned.

Paul Pedley, the executive deputy chairman of Redrow says the solution may be to redefine “affordable”. The old guidance, PPG3,* included low-cost market housing in its definition of affordable, but this was excluded in supplementary guidance. If it were included once again, says Pedley, housebuilders could provide the high levels of affordable housing the government requires. “We’re excluding all the first-time buyers that just need a bit of help on the housing ladder,” says Pedley. “We’re polarising the market.”

Essentially, social housing for large families is not economic for a housebuilder to supply, but it could build affordable two-bedroom properties for people in their early twenties who are desperate to buy a home.

Extracts from: Blair, Brown and bling, Mark Leftly, Building
More at: Building

*Planning Policy Guidance Note 3: Housing, commonly abbreviated as PPG 3, is a document produced by the British Government to advise local planning authorities on the treatment of housing within the planning process. The current version was introduced in March 2000 following the Rogers Report and replaced the 1992 version. Two updates were published on 24 January 2005 - Planning Policy Guidance 3: Housing: Planning for sustainable communities in rural areas and Planning Policy Guidance 3: Housing: Supporting the delivery of new housing.

PPG3 was introduced to steer policy away from the development of large, spacious houses on greenfield sites, towards higher density development using brownfield or urban sites wherever possible. It also sought to compel developers to provide a greater element of affordable housing.

Because of the slow speed at which Local Planning Authorities Local Plans were updated - and the recent changes to the planning system which abolished Local Plans in favour of Local Development Frameworks - local policy is often at variance with PPG3, resulting in confusion and a higher incidence of appeals.

Source: Wikipedia


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