Brexit isn't holding up surging house builder Redrow, but planning is

Despite the Brexiteers' claims, immigration will continue to sustain demand for new housing. The builder makes a strong case for reforming the planning system to improve supply, but it will cost money

James Moore
Tuesday 06 September 2016 18:08 BST
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Redrow wants planning reform so it can more easily build homes like these
Redrow wants planning reform so it can more easily build homes like these (Getty)

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Louise Thomas

Louise Thomas

Editor

Much of the recent commentary about house builder Redrow is focused on the non existent impact of Brexit on its results.

The biggest economic, political and social issue facing the UK merited just one line in the middle of what was an admittedly sparkling set of numbers.

For the record it said this: “We have seen very little impact as a result of the Brexit vote.”

Well, duh. The vote did prompt a fall in mortgage approvals – they dropped to an 18-month low in August – but you would expect that to pick up, as other economic indicators have now that the initial shock of the result has passed.

The damage done by this asinine act of self abuse on the part of some UK voters will be felt in the long term.

Even though it will be felt, Redrow and its peers can feel a certain amount of reassurance as a result of one of the important points that Brexiteers repeatedly glossed over: immigration isn’t going to fall by very much, if at all, as a result of the vote. Even Prime Minister Theresa May is starting to recognise that.

The fact is that the UK population will continue to steadily rise for the foreseeable future and that means that there will continue to be a strong demand for the new homes built by Redrow and its peers.

They won’t be immune from the long term economic fallout caused by the vote, but their investors can be reassured by the reality that what people like to call the market fundamentals are going to remain in their favour.

However, despite having very little apparent cause for complaint, Redrow isn’t entirely happy. The FTSE 250-listed company reported a 23 per cent improvement in pre tax profits to a record £250m, well ahead of what analysts had forecast, on revenues up by a fifth to £1.38bn.

Those numbers might have been even higher had it not been for the vexed problem of Britain’s sclerotic planning system. It slows the company’s ability to get developments going after the arduous task of getting its hands on land, and thus shows the increase in housing supply the country desperately needs.

Now, I’m not going to say here that the planning laws should be scrapped. They are necessary, and it is important when it comes to developments that things such as their infrastructure requirements are carefully considered.

Redrow’s chief executive John Tutte tells me that his company takes account of them, and early on, and that he is happy to work with local authorities. Developments are more attractive, and thus more saleable, when they come with amenities such as shops, and schools and roads, and railways. Sadly, not every developer can so easily make that claim.

Where he has a point is in his criticisms of the Byzantine nature of the planning process. This is partly the fault of local authorities, which insist on holding interminable hearings on details such as the conditions attached to planning permissions even after developments have been agreed to in principle.

Some, however, are the fault of central government which has starved local government of resources. When Chancellors order cuts of X per cent to local government budgets, planning departments suffer along with the rest. Ministers then wonder why no one believes their inflated targets for house building. There’s their explanation.

Of course everyone needs resources, and can explain why their cause should take priority. Still, with house prices being forced ever higher by demand, combined with the tensions caused by a chronic lack of supply, an injection of money to speed things up might be in order.

If agreement on reforms could be secured, perhaps house builders themselves could kick some of it in? How about it Mr Tutte?

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