“Barratt’s needs £1bn to survive”, screamed a headline. “Taylor Wimpey’s £2bn debt now junk”, yelled another.
There’s no denying that the news from the construction industry is bad and, some say, dipping sharply towards truly dreadful. First-time house buyers have virtually fallen off the radar, prices are dropping and building sites have been mothballed.
Reports from many UK timber companies on the state of trade also make grim reading. There is news of redundancies and plant closures and industry figures are predicting choppy waters and more pain ahead. Companies supplying a diversified market seem to be set better than those locked heavily into the national house building sector. But it looks like it’s going to be ‘interesting times’ for business generally.
The long and short of it is that there doesn’t seem to be much scope at the moment to don the TTJ rose-tinted specs. But while there are plenty of riders, including the government, the banks and the timber and construction industries generally doing the right thing, the longer-term perspective really should still be positive.
The ‘crunch’ may hit budgets, but it’s not going to stop the London Olympics or Glasgow Commonwealth Games happening and both add up to huge construction projects.
The government also says it won’t be diverted from its goal for the UK to build three million new homes by 2020.
And the stress for both the Games and new housing will be on sustainability, which spells opportunity for timber.
So what the government needs to do, and building and associated industries need to put the pressure on to make sure it does, is stick to those long-term construction aims and, in the short term, to maintain capital spending. It also needs to provide as much incentive as it can to persuade the financial sector to release more mortgage cash to those vital first-time buyers.
Given the government’s aims, it just cannot afford for the current market situation to leave the UK with damaged construction capacity, and we can’t afford to let them.
