Brickonomics

Caroline Flint has just announced the much talked of rescue plan for the housing market - couched in terms of affordable housing, but in essence an attempt to bolster the crumbling house building sector.

It has been welcomed by the National Housing Federation, so it must be good. And I am sure the Home Builders Federation will, through gritted teeth, also welcome the move.

See what you think, but to my eyes it appears to be the equivalent of throwing a drowning man a cork in rough seas.

Here are the five points of the plan:

Continue reading "Housing rescue plan? What housing rescue plan? " »

Given the slew of shocking data and the seemingly inevitable fate that awaits construction I thought it worthwhile casting my mind back to the horrors of the early 1990s and to try to recall the mistakes firms made in reacting to recession.

So here is my: Top five mistakes in a recession

Go for turnover at all cost - the classic mistake of the early 1990s. Turnover without profit and laden with risk is a burden you may not be able to carry through to the return of the good times. Chasing down prices may screw your competitors, but it will screw you too. Seek out profit, keep risks down.

Stick with crap clients - if they don't pay well, if they absorb valuable management time, why are you bothering? Ditch them and expend more effort on those who are worth it.

Let your clients treat you like a bank - trying not to upset your client with demands for money that you have a right to is a quick way to becoming a used doormat. The more they owe you the less you dare complain. Keep clients' credit under tight control.

Screw your suppliers - you need all the help you can get, irritating the people on your side is not a top move. This applies to your staff as well. People will accept that you can't be generous, but be honest and treat them well and there's a better chance they will help you in times of trouble.

Diversify - it sounds like top advice to spread risk and diversify. But ask yourself this: if you weren't in it in the good times why now when times are getting tougher and you have no track record? Stick to what you do well.

Obviously I can already here the voices saying "that's all very well, but..." so if you disagree or have better advice, let me know your views

However much you may have been expecting it, the pace of bad news is overwhelming. Back to back, undiluted and dismal.

The buyers body, CIPS, today reports on construction and unsurprisingly, given the current wave of shocking statistics, its Purchasing Managers Index for the industry plunged to unchartered depths - from an appalling 43.9 in May to a far worse 38.8 in June. (50 represents equilibrium)

And in line with other surveys its Employment Index has turned negative. Although this may not come as a surprise, with housebuilders currently shedding jobs like trees shedding leaves in winter. The problem is though that the winter chill is now catching the rest of the construction industry.

Who knows whether it is good news or delusion, but the index for future workload remained positive at 57.6, although it was a survey low. (Note that the survey has not captured data on a full-blown recession)

But a trend that must be taken especially seriously is rising costs. The seasonally adjusted Input Prices Index recorded its highest-ever reading of 81.5 - a figure indicative of a significant rate of monthly inflation, says CIPS.

This clearly is not a time to go hell for leather bidding for work. Calm, reflective, cautious management is what is needed here.

A dramatic reversal of fortunes saw confidence in the future of construction workload plunge in the second quarter of this year to the lowest level ever recorded by the chartered surveyors body RICS.

The figures suggest that more than 11 years of almost uninterrupted growth has come to a shuddering halt, with a third of firms polled saying that workload fell in the second quarter of this year, compared with just 14% saying workload increased. Recession for construction now looks almost inevitable.

Continue reading "Workload and job prospects crash, confidence plummets - RICS" »

The Nationwide's latest stats for June on house prices confirmed what everyone knew: house prices are still falling. The figures put the average house price down 0.9% on the month, 6.3% on the year and 8% down from the peak in October.

If the current rate of fall continues for the rest of the year, Nationwide will be measuring a fall of between 10% and 11% for 2008.

Continue reading "House prices down 8%, but where is the bottom of the market?" »

Bored with the subprime homesick blues, the US press has turned to tracking down the rich who have handed back the keys on their multimillion dollar homes. It's "celebrity foreclosures" folks!

That couldn't possibly happen here...

More news to spoil your breakfast came in today. The latest consumer confidence barometer reading taken by GfK NOP shows consumers expectations of economic prospects in the coming 12 months at the lowest level since the pollster began asking the question in 1982.

What does this mean for construction? Well what it suggests is that there is serious cause for concern and yet more evidence that each and every construction firm should look closely at its business, ditch any complacency and consider how to steer itself through trouble times.

A quick look at the latest National Accounts data provides enough information to suggest all is not well. This poll data simply throws forward a little and suggests worse is yet to come.

Continue reading "Poll shows confidence at new lows" »

The latest quarterly national accounts provide yet more worrying reading for the construction industry.

Firstly, the revisions made by the statisticians have just made the pretty poor figures originally released look worse.

GDP growth in the first quarter is now officially 0.3% compared with 0.4% (to put that in context 0.1% of annual GDP is about 1.4 billion), so expect the assumptions of the forecasts you see to take a downward shift.

Continue reading "First quarter national accounts figures provide cause for concern" »

For anyone keen to explore the deeper reaches of the effects caused by a slowdown in the housing market here is one for the files.

Moneysupermarket.com appears to be seeking to quell investor fears about the impact of "extremely challenging" conditions in its mortgages and loans business.

The National Housing and Planning Advice Unit (NHPAU) set up to provide advice on making homes affordable today released its latest advice on how many homes England needs by 2020.

The range of extra homes the unit says are needed by 2020 is between 2,957,000 and 3,475,900. That means an addition to the housing stock of between 240,100 and 297,700 each year to 2016, says the report.

That rather begs the question of whether we will have an industry in a fit state to meet those targets when we come out of this downturn.