Sir John Egan must have felt a bit like Detective Inspector Sam Tyler from Life on Mars when he first encountered the 1998-era construction industry, filled as it was with firms dressed in metaphorical kipper ties and brown leather jackets who weren’t afraid to cut a few corners to get a result.
His solution to all that nonsense was partnering: the revolutionary idea that members of the same team ought to work together … with the help of open-book accounting, profit sharing and a relationship that lasted beyond the project in hand. The notion caught on pretty quickly, helped greatly by a benign economic climate.
It’s fair to say that this touchy-feely cultural revolution rather passed housebuilders by, but even the toughest cynics in the business must be shocked by the strong-arm tactics that Taylor Wimpey is using to squeeze its suppliers, which are akin to the methods that have landed the supermarkets in trouble with the competition commission. Now others are doing the same or similar: Bellway is (politely) asking for a discount, while Barratt has said it will look to reduce the cost of new contracts.
When things get tough in the industry, it’s not surprising that companies look to pass on the pain to their suppliers. It’s called a market. But surely it makes good business sense to talk things over first, rather than suddenly hitting them on the head with a letter demanding a 5% cut in prices. Apart from anything else, that looks like a board repeatedly pressing the panic button.
Added to that, housebuilders know that a buyer’s market means that quality is king. If a supplier is presented with a non-negotiable demand for a price cut that is about the same size as its profit margin, how is it going to get a result? Cutting corners on quality and submitting a few claims spring to mind.
Nuclear is still a distant vision
So the government has finally fired the starting pistol for nuclear power.
This is fantastic news in a downturn, but now is not the time to sabre open the champagne. A 12-station programme will only happen if the government can face down the protests, some of them coming from within the construction industry. The eminent engineer Mark Whitby, for example, is prepared to spend £50,000 of his own money to prove that the energy needed to turn Australian yellowcake into fuel rods makes nuclear a poor option. Other protests will come as a side-effect of opposition to a planning commission. So if we’re to make headway we will need planning reform that people feel to be broadly fair, a safe way to store waste and a realistic market for carbon that will also favour renewables and energy conservation. With all that to do, the idea of power stations starting on site by 2011 looks optimistic.
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