Budge up, Sir Humphrey, your boss needs to shed some more buildings


James Ashton
Friday 05 December 2014 23:31

George Osborne might not like the BBC’s suggestion that his cuts risk taking Britain back to the Depression era depicted in George Orwell’s The Road to Wigan Pier, but not all members of the Government object to the idea of being taken back in another tilt at saving money.

In its latest update, the Cabinet Office boasts that the civil service is now at its smallest size since the Second World War – either 20 per cent smaller than it was in May 2010, if you believe the Institute for Government, or 16 per cent according to the Office for National Statistics. Much of this has come about through reforming employment terms, but the shrinkage also applies in the physical sense.

Central government has given up 2 million square metres of property since the Coalition took power – equivalent of 20 per cent of its estate. Among the most high-profile of these deals is the £60m sale of a long lease on Admiralty Arch to Rafael Serrano, the former investment banker whose Prime Investors Capital is converting it into a five-star hotel and members’ club. But there have been plenty of others.

A celebration of this feat of reduction seems a little premature when you consider what central government is left with. For example, it used to have “dozens” of buildings in Bristol; even after a “substantial” cut, it still occupies 27.

The Cabinet Office is aiming for up to £6bn of extra receipts from property by 2020 – as part of its ambitions to find £10bn of savings by 2018 and up to £20bn by 2020 – not just from giving up offices, but airfields, barracks and prisons. Property developers would like the politicians to get on with it. Those builders that have been urged to solve Britain’s housing shortage say it would be easier for them to do so if the Government got on with releasing the estimated 40 per cent of land on which it is sitting in the shape of surplus Ministry of Defence and NHS sites.

Civil servants who hang on to their jobs during the inevitable cull will not be rattling around in half-empty buildings. A target to limit each full-time employee to an average of 10 square metres of office space by next year will be ratcheted down to 8 by 2018.

That sounds like rabbit-hutch territory, but open-plan working is driving down space requirements all the time. Commercial lets are currently in the range of 8 to 13 square metres, according to the British Council for Offices, suggesting this new target is eminently achievable. It’s time to budge up, Sir Humphrey.

It’s got Sheilas’ Wheels but it needs a sense of direction

What to make of the boardroom changes at the Sheilas’ Wheels group Esure, which were shuffled out on Autumn Statement day? It’s hard to know which is worse – that the company is shedding two of its well-regarded non-executives in former CBI chief Dame Helen Alexander and Anthony Hobson, the ex-Northern Foods chairman; or that Peter Wood, the chairman and founder, is committing himself to the business for the medium term.

No one did well out of last year’s Esure float apart from Mr Wood, who pocketed £200m only to watch the shares slump when the business warned of lower growth in premiums and disappointed with the dividend. The stock still trades at a quarter less than the offer price and suffers by comparison with Direct Line, also founded by Mr Wood, whose shares change hands for two thirds more than the price at which they came to market.

Founders and their floated companies often have strained relations. Sir Stelios Haji-Ioannou has little to grumble about at easyJet these days, now that the airline is flying so high with Carolyn McCall at the controls, but it wasn’t always thus. Mike Ashley can keep a tighter rein on Sports Direct as executive deputy chairman. Despite rows over his pay package and unconventional style, if the shares keep rising, most investors think that’s fine.

In the case of Esure, there would be nothing worse than a back-seat driver. But if the chairman, who retains a 31 per cent stake, intends to hang around, he should be doing more to demonstrate that he is driving value for all shareholders.

New bank challenger is better off online than in the regions

Subject to gaining its operating licence, Atom will join the pack of new British banks next year. It has an eye-catching list of backers, including the fund manager Neil Woodford. More important, it has the right idea.

Too many banks are still fixated on their branch networks, probably because they have hundreds of high street outlets that they don’t know what to do with. Atom aims to be digital-only, which means no phone banking and only branches for business customers. The question is whether it can break into the mainstream. First Direct, the original branch-free bank, has amassed just 1.25 million customers in 25 years and only 60 per cent of them use its web offering.

Better to nail the high-tech customers than for a newcomer to open its doors as a regional bank, though. Ed Miliband still harbours a vision for a regional banking network modelled on Germany’s community banks, which he believes could rebuild trust in the sector.

But if regional banks are the way forward then how come two of the strongest franchises in the country, the Clydesdale and Yorkshire banks, have been put up for sale by their owner, National Australia Bank, after years of deliberation about how to develop them?

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