A request works best when backed by menaces. The housing secretary, Michael Gove, seems to be close to getting much of what he wants from stage one of his operation to raise serious sums to fix the cladding and fire-safety crisis that was appallingly highlighted by the Grenfell Tower disaster of 2017.
Fifty-three developers were invited, on pain of being cut out of planning approvals, to sign a building safety pledge that commits them to fund the costs of remediation work on all medium- and high-rise buildings they have built over the past 30 years. The number of corporate holdouts is likely to be in low single digits.
Barratt Developments was the latest big name to sign on Wednesday, making a provision of £350m to £400m, even though, as it said, cladding and wall systems were signed off as compliant at the time. Persimmon, Taylor Wimpey, Berkeley, Crest Nicholson, Redrow, Gleeson and more are also on board.
The pledge-signers have also promised not to make claims on the £5bn building safety fund that will remediate buildings taller than 18 metres. Since the cash for that fund will be raised in part by a 4% levy on residential developers’ profits for the next 10 years, you can understand why a few executives grumble about paying twice. Well, yes, but that’s politics. Gove’s “polluter pays” exercise was a welcome relief after predecessor Robert Jenrick’s grotesque attempt to load costs on to leaseholders.
Equally, however, there must come a point at which the remaining bill has to be spread more widely. This is the tricky stage at which Gove has arrived: how to fund work on so-called “orphan” buildings of 11 to 18 metres that were built by foreign firms or firms that have subsequently gone bust. The tally will also include buildings more than 30 years old and those that local authorities may have installed defective cladding after construction.
The bill for that lot could be as much as £3bn, though it’s hard to be precise because the housing department is less than transparent about its modelling. The easy option would be to hit the big housebuilders with another levy, on top of the annual 4% tax that kicked in this month, but it hardly seems proportionate. This may be one of those very rare occasions where the housebuilding industry – a place of fat profit-margins, big boardroom bonuses and soft subsides such as help to buy – deserves a modicum of sympathy.
As a report from the housing select committee put it last month, there are two challenges with the “polluter pays” principle: multiple polluters, and untraceable polluters. On the multiple front, the list of non-developers which contributed to fire-safety failures over many years is long. Aside from manufacturers of shoddy cladding, the committee noted product suppliers, installers, contractors, subcontractors, architects, building control and the redevelopment industry. They’ve barely been touched by Gove’s efforts to date.
On the untraceable front, UK developers may reasonably ask how hard Gove is trying to trace and chase foreign firms. The House Builders Federation estimates UK housebuilders built less than 10% of the estimated 8,000 buildings still in need of remediation. Gove’s department promises a full funding package in due course. We’ll see what it brings but, if more requests-cum-threats are needed, Gove ought to find new targets.
A flotation 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 greetings cards and gifts. The beauty of the cards side is that the product can be printed when the customer orders; and the add-on gifts can be pitched to a highly engaged audience. Meanwhile, e-commerce breezes should be favourable for years to come.
It was on this basis that Moonpig commanded a £1.2bn valuation when it floated last year at 350p a share. Buyers at that lofty price-tag cannot complain about subsequent newsflow: Moonpig has upgraded its guidance several times, including this week. The lockdown boost to revenues is inevitably fading but all the underlying long-term trends seem intact.
But, oh dear, look what’s happened to the share price: having flown as high as 480p, it is now 211p. The moral of this tale is probably the old one that the flotation hype machine should never be trusted. It’s not Moonpig’s management’s fault, but the general e-commerce frenzy of a year ago now looks wildly overdone. The company will probably keep growing for years, but £1.2bn for a greetings cards business with £300m-ish of revenue was always likely to be too much, too soon.
