Steve Morgan interview: ‘It’s like the government wants to destroy the industry’

Steve Morgan is upset. No, let’s be honest, he is livid. “What the f**k?” he splutters. “What is going on?”

Speaking in the office he has built at his 1,000-acre Carden Hall estate, the 70-year-old founder of £2.1bn turnover Redrow is trying to get his head round why the current Conservative government is – in his words – “so anti-housebuilding”. A £1m-plus donor to the Tories under Boris Johnson’s leadership, Morgan probably has more reason than most to feel let down by the current administration.

“People who, with their grey-haired cronies, want to draw up the drawbridge, because their view is ‘bugger you, I’m alright Jack’,” he says of the latest ministerial team, exasperation clear in his still-strong Liverpudlian accent. “I call them my Marie Antoinette politicians: ‘Let them eat cake’. They’re turning their back on the young people of the country.”

But Morgan, who left listed housebuilder Redrow for the second and final time four years ago this month, has got other things to think about in addition to the government’s perceived capitulation to anti-development sentiment. Next year will be 50 years since the Garston-born entrepreneur set up Redrow with a £5,000 loan from his dad, and he still retains a significant stake in the firm.

His ownership of Redrow has left him enormously wealthy – the Sunday Times estimates his fortune at just under £800m – and, via his personal investment business Bridgemere, the former owner of Wolverhampton Wanderers still has the energy and appetite for new ventures.

Just over two years ago Bridgemere took over regional housebuilder Castle Green, formerly MacBryde Homes, and set it on a major expansion plan. More recently Morgan set up a new land promotion business, Carden Group, to try to find a way through the planning system chaos.

I am here in the glorious landscaped setting of Carden Hall in Cheshire, which Morgan bought in 1995, to hear of his plans for these latest ventures – and his ideas for cutting through the current housing crisis. But first I need to get him to stop venting about the government and tell me more about them.

Dealing with the crap

Top of his agenda is the state of the planning system – and Michael Gove’s latest proposals to reform it. He says he “feels sorry” for the executives working in the industry at the moment, given the combination of over-stretched local planning authorities, water and nutrient neutrality hold-ups and the proposals to amend national planning policy.

“Having to deal with the crap that’s coming out, with planning and water neutrality – there’s no help from the government. It’s almost like the government wants to destroy the industry,” he says.

“We’ve got the worst housebuilding ratio relative to population in the Western world,” he says, “and all they want to do is clamp down even more.

“We’ve got well over 50 local authorities who have suspended their local plan process” – according to Lichfields the number is 47, but this is not far off – “since the government announced the Levelling Up Bill. We’ve even got Maidenhead and Windsor with an adopted local plan seeing if they can unwind it. What the f**k is going on?

“You can’t print that,” he laughs after the expletive.

The government has turned its back on home-owning. We’re becoming generation rent. Build to rent is the only show in town

The recent NPPF consultation saw the government propose numerous carve-outs for councils from the requirement to meet housing need, including around green belt and development density, and propose removing the need for councils to show a five-year housing supply. Morgan describes the changes, which effectively water down the working of government housing targets, as “putting the loonies in charge of the asylum”.

While he says some local councils will behave responsibly on housing, he predicts that, if the changes go through, there will be “dozens if not hundreds of them who will turn their back and who will pacify the Nimby lobby, and get away with it.”

Planning consultant Lichfields has estimated that the changes will reduce housing supply by around 77,000 homes per year – albeit Morgan doubts the effect will be quite that severe.

This is personal

For Morgan, of course, this is personal. He gave a reported £1.25m to the Conservatives under Johnson’s leadership – a period when, if perhaps now a distant memory, the party was regularly accused of being in developers’ pockets, given the extent of property industry donations, and controversy over the pro-development 2020 planning reform proposals. Morgan was even a signatory to a public letter from major Tory donors urging Johnson to stay on as PM just before he was forced out last July.

However, since the appointment of Gove to the housing secretary brief, the mood music for the industry has been very different. Gove has not only overseen an about-turn on planning policy – including the notorious 6 December deal with anti-development backbenchers – but he has also levied billions from the industry to solve the cladding crisis, some complain unfairly, and described major housebuilders as a cartel.

Morgan says he has heard politicians call developers “gangsters”. Last month, Churchill’s boss Spencer McCarthy described the way the government had operated in recent months as a form of “blackmail”.

I find it a complete anathema that Labour can now claim to be the party of the home buyer. That’s like having a dog meowing and a cat barking

Morgan calls the government’s change of direction a “kick in the teeth” – but claims not to be personally hurt by it. “I’ve a skin like a rhino. I think it’s a kick in the teeth to young homebuyers, to all young people who want to get on the housing ladder and buy their own home and those on the ladder who want to trade up.”

Significantly, for a lifelong housebuilder, he says: “The government has turned its back on home-owning. We’re becoming generation rent. Build to rent is the only show in town.”

While he says the housing performance of successive governments has been a “disgrace” that has let down homebuyers, and the rigid adherence to green belt designations “pure stupidity” in many instances, Morgan seems particularly thrown by recent political developments. “I find it a complete anathema that Labour can now claim to be the party of the homebuyer,” he says. “That’s like having a dog meowing and a cat barking.”

Labour leader Sir Kier Starmer has been taunting Rishi Sunak at prime minister’s questions on housebuilding numbers and giving in to Nimbys, I point out. “And he’s right,” Morgan bats back, incredulous. “I can’t get my head round it. He’s right.”

So, surely, then, he won’t be giving any more money to the Conservative Party? “You can draw your own conclusions,” he says, declining to say more for the first and only time in the day.

Nutrient nightmare

One thing that Morgan is willing to talk about is how one of the planning issues that he is most concerned about – nutrient neutrality – has affected Castle Green, the regional housebuilder he bought through Bridgemere in the autumn of 2020, with a plan to quadruple output in short order. Castle Green, which sold 182 homes in the year prior to the buyout, has seen its expansion temporarily curtailed, Morgan says, because two of the biggest sites it bought ended up being entirely stalled by the nutrient problem.

Nutrient neutrality has been a hammer blow to Castle Green. But for them, read dozens of others. I feel for SME builders

Morgan says the two sites on the River Dee, for 120 and 140 homes respectively, were bought with planning permission, meaning Castle Green paid full price for them, but then were subsequently held up at discharge of conditions stage. This, combined with delays on another scheme where reserved matters planning was unexpectedly refused, added up to a “very difficult” 2022 for the firm, Morgan says, given the investment laid out to support expansion.

“For a company the size of Castle Green, these were major blows last year. They missed the market. It’s just much harder than it should have been,” he says.

The experience shows how, for small firms, these delays can quickly become life or death situations. Morgan says Bridgemere’s investment in the business – already large due to the expansion – has topped £100m in recent months as it has seen up to £25m of capital tied up in the stalled sites, albeit the level of finance is reducing as cash requirements ease.

“Without Bridgemere backing, the business would have folded,” he says, underlining that the Bridgemere support was never in doubt. “Thankfully, we’ve got the strong balance sheet because of Bridgemere.”

He says the firm will build about 250 units this year, and show some further limited growth next year, but that he does not currently have plans to ape the likes of ex-Persimmon boss Jeff Fairburn, who has bought out regional builder Avant and is attempting to grow it into a national business. “We’ve got to learn to walk before we can run. This is a business that is growing nicely.”

Morgan’s main concern is what his experience shows about how the nutrients problem – which the HBF estimates is holding up 120,000 homes in the planning pipeline – is affecting housing delivery. “It [nutrient neutrality] has been a hammer blow to Castle Green. But, for them, read dozens of others. Given the nature of that part of the country, it’s disproportionately hit smaller builders. I feel for SME builders.”

A risky business

Morgan’s latest venture, Carden Group, launched in September last year, may actually benefit from the planning chaos he has spent the rest of the interview railing against. The land promoter is one-third owned by Bridgemere, with the rest owned by its managers, Will Heath – also chief executive of Bridgemere – and former Taylor Wimpey strategic land director Harry Aubrey-Fletcher.

I was the last of the housebuilders that would do these so called reckless deals. People are getting more and more risk averse. The fun’s gone out of the game

The idea behind Carden, which has just secured planning permission on its first scheme, a 1,000-home new settlement called Treasbeare near Exeter, is to buy sites freehold early in the planning process, rather than take options. Morgan says the firm has a number of other deals both done and under way, including one on the south coast for 900 units, and “several others” in legals.

It is a model that takes a lot of up-front investment for uncertain return, and requires skill and the kind of appetite for risk that listed housebuilders – tightly policed by shareholders – do not have anymore. “It’s entrepreneurial. We don’t mind taking risk,” Morgan says.

“Because of the way the major homebuilders are run these days, they’re almost not allowed – by their non-exec directors or their shareholders – to do these things.”

Morgan clearly has an appetite for risk – he thinks forecasts of economic decline this year are overdone and has been buying shares in housebuilders on the strength of his view. “I was the last of the housebuilders that would do these so-called reckless deals,” he says, lamenting how the industry has changed.

“Tony [Pidgley, late founder of Berkeley Group] did [too]. We were the last ones that would do those mad deals. The likes of Tony and myself don’t really exist anymore.

“People are getting more and more risk averse. The fun’s gone out of the game.”

Of course the demand for the land being sourced and promoted by Carden Group is driven in large part by the shortage of development land created by the current planning system crisis. “If it was easy, Carden Group wouldn’t exist,” he says. “It creates opportunity for those who’ve got the ability and the knowledge and the bravery to go and do it.”

Unsurprisingly, Morgan’s prescription for a solution to the current housing crisis is partly a planning one. He wants to free up SME builders by rolling back the stipulations of the 1990 Planning Act – and the subsequent legislation built on that in 2004 and after – by improving access to SME finance, and by looking at how local government reforms and the rise of large unitary authorities have impacted the supply of small sites to the industry.

Rocket science

But his big call would be for a new era of new towns backed by government bodies, such as the Commission for New Towns (CNT), which in previous generations was able to command the resources and powers to get things done. “I think Milton Keynes is a huge success story. As a model for creating a new town, it worked. Industry can’t do that, it was government-backed.”

“They helped the SME builders because they had allocations. They put all the infrastructure in, they packaged sites of anything from 40-50 units up to 250 units.”

Contrary to fears that working with a government body on development would be a recipe for bureaucracy and delay, Morgan says the CNT, which was its own planning authority, delivered permissions “within two to three months” if you built within the design code, and made sure no one builder got more than his fair share.

“I think Milton Keynes is a huge success story. As a model for creating a new town, it worked. Industry can’t do that, it was government-backed.”

“With SME builders, you could pay for it on the drip – you could buy 60 units, and only put a small amount of outlay,” he says. “Which was fantastic.

“You would have sites for the big boys, sites for the medium-sized boys and sites for the small firms. It’s not rocket science. Why make it so difficult? It’s not a difficult thing to do.”

In the short term, however, it is day-to-day planning that is still top of Morgan’s agenda – and the fact the department under Gove is, to his mind, heading in the wrong direction. “Let me in there for a month and I’ll sort it,” he says at one point. “But they wouldn’t do that.” I suspect he is right on both counts.