Yes, it’s a housebuilding boom for Britain! We’re promised 400,000 new homes by the end of the decade, and what’s more, they’ll all be affordable. Half of them will be even more affordable, starter homes to be sold at 20 per cent below market value. It’s the biggest housebuilding programme since the 1970s!
Of all the fantasy constructs in George Osborne’s spending review, this one is surely the prime site. Even if the money to build really is there, treasury wishes will not make turn it into houses. Start with the shortage of building skills. The last recession wiped out small builders and saw tens of thousands leave the industry. One in eight of those remaining is over 60. Specialist recruiters Randstad calculate that a million more construction workers would be needed to build the 300,000 homes a year Britain needs, and that assumes they are not attracted away into the money-no-object white elephant projects like Hinkley Point or HS2 (already up to £55bn from £50bn, thanks to “inflation”).
Private sector housebuilders have no enthusiasm for meeting the housing demand. Their business model is essentially a way of capturing rising land values, and the chronic shortage is essential to keep prices going up. At present, they are actually slowing their rate of building, blaming skills shortages in the south east and softer prices elsewhere. This might, as Sir Stuart Lipton put it earlier this year, mean fewer “awful pieces of urban dereliction” from the combination of the planning system and housing estates, but that’s cold comfort.
Shares in housebuilders have been splendid investments since the start of the financial crisis, and they are now priced for ever-expanding volumes and margins. Mr Osborne’s headline-grabber gave the builders another leg up, but it’s as well to remember that when all seems set fair is usually the moment to sell shares in such notoriously cyclical businesses.
On the wrong side of the digital divide
The board of banknote printer De La Rue is “mindful of the importance of dividends to shareholders”. It explained as much in May as it cut the payout from 42.3p to 25p, and last week it declared the new, lower interim dividend.
It’s conventional, when “rebasing” the dividend this way, to add an uplifting rider about how this is a floor for future increases. De La Rue’s newish chief executive, Martin Sutherland, would say only he hoped to maintain it. Unfortunately, this has done little to maintain the share price, now at its worst for more than a decade, and less than a third of its peak. At 423p, the yield on the cut dividend is nearly 6 per cent.
The latest figures were no worse than feared, but “underlying” earnings are barely enough to cover the 8.3p payment. Mr Sutherland’s problem is that De La Rue faces an existential threat. Cash is becoming increasingly anachronistic when it doesn’t buy a ticket on the bus. Coins seem quaint, and paper money is not far behind.
Half Britain’s under-25s have never written a cheque, Canada has stopped printing dollar bills and half the transactions in the UK are now cashless. De La Rue’s plastic banknotes, assuming we take to them, last much longer than the paper kind. Security printing offers a short-term prospect to combat counterfeiting, but the spread of etickets on smartphones threatens that too.
Growth in developing economies does push up demand for banknotes. Yet just as mobile telephony in Africa made laying fixed-line networks pointless, the technology will lead the world to cashless transactions. Mr Sutherland is doing his best, but De La Rue increasingly looks like a classic victim of digital disruption.
Just a glass of water, thanks
A welcome invitation arrives to Christmas drinks at the National Gallery with JP Morgan Cazenove. Oh, hang on. “Your acceptance of this invitation represents your confirmation that you have obtained necessary internal approvals from your department or superiors to participate in this event on the basis of JP Morgan paying the costs.” Next year, those accepting will be invited to bring a bottle of Aldi champagne, plus a certificate from the compliance department confirming it as an approved business expense.