Labbad seems to want Bovis to emulate companies such as Berkeley Group, which are able to change their strategy on a sixpence and leave threepence change
Dan Labbad this week breaks his silence to set us straight on the relationship between Bovis and Lend Lease, its parent company. As old timers in construction will know, uncertainty about the intentions of Bovis’ owner is about as novel as civil unrest in France - in the nineties it was the P&O conglomerate that was always about to sell it, float it, integrate it or allow a management buyout. In the noughties the same rumours swirled around Lend Lease, given extra impetus in the past year or so by continual changes in the contractor’s senior management and the company’s structure and strategy, all of which created the impression that, for Lend Lease, Bovis was a problem it was struggling to solve.
One issue was the degree to which Bovis should be integrated within Lend Lease’s operations. At one extreme is the Canary Wharf Contractors model, at the other a purely formal relationship. In his conversation with Building on page 30, Labbad clears this up for us: Bovis is to take on 20-30% of Lend Lease’s work, and scratch for the rest of its meals in the market. But which markets? The review conducted by Nick Pollard, the firm’s former chief executive, proposed a move into civils. This was prescient, given that Bovis was best known for high-end commercial and education schemes, neither of which are exactly booming these days. But Labbad is less convinced. Although he’s clear about his interest in energy from waste, his general position is that he is “reviewing the review”. Or, to put it another way, he appears to believe that sensible plans can’t be drawn up until we have a sensible economy to apply them to. Yes, infrastructure looks a good bet (pages 12-13), but such is the degree of political and economic risk around that the best course of action is to try to decipher “market signals” - that is, to emulate companies such as Berkeley that seem able to change their strategy on a sixpence and leave threepence change (page 17). Underlying that is, of course, the Bovis brand. Whatever decisions Labbad arrives at will depend on leveraging its strength; the danger is that if he leaves it too long, it may become a diminishing asset.
What change will we have from £6nb?
So George Osborne’s spending review has put an end to New Labour’s dreams of an urban renaissance and a narrowing of the North-South divide (see pages 22-23). Instead, the coalition is to introduce an untested funding model whereby 150,000 “affordable” homes are to be funded by unaffordable rent rises for social tenants - at least in London and other big cities. The headline figure is that the communities department’s budget is to be cut 75%, which means in practice that a myriad pots of regeneration money are about to vanish, as is support for private housebuilding through HomeBuy Direct, Kickstart and the Homes and Communities Agency. All in all, about £6bn of regeneration funding has been chopped.
Is there an upside? Well, local authorities will have greater control of their own destiny as the new localism agenda gets translated into planning statements and council policy, which should be good for developers that master the new system. But, again, we are facing another abrupt policy shift. The hope is that the Treasury’s general principle of incentivising local authorities is achievable on the ground. Some comfort may be gained from the fact although most expect “tax increment financing” (that is, borrowing against a development’s future tax take) will be capped and “on balance sheet”, as has been shown to work in America. But if you didn’t realise it already, the days of public support for private development will soon be a distant memory. It’s as bad as you probably thought it would be.