Make no mistake, last week’s vote to leave the EU has created many unknowns but construction is an entrepreneurial and essential industry and will do better unfettered by EU regs
I wonder if Building’s Dave Rogers did ultimately vote Leave? Like Jeremy Corbyn. (You’re never in a million years going to persuade me that Jezza actually believed a word of his sporadic campaign utterances.)
Dave might have been humming the Clash’s “Should I stay or should I go” as his blogs flip-flopped from Leave to a grudging Remain. As for me, to paraphrase James Brown: “Say it Loud, I’m out and I’m Proud”. But now … now nobody’s talking to me. Including my wife.
That said, at risk of stirring up a lynch mob of cappuccino-swirling architects, let me re-affirm that my reply to Dave’s last blog: Brexit will be good for Britain. And (if the mandarins in Brussels stop sulking) good for Europe.
But it didn’t look that way staring at my screen on Friday and on Monday. It was a sea of red (ie shares going down). Especially the housebuilders, which fell by around a third in two sessions.
Make no mistake. Brexit is almost certainly a challenge for the housing market, especially in London. There is no effective government. There is no opposition, full stop. Sterling has, well, taken a pounding. And England’s out of the Euros (Remain will find a metaphor in that). So, not the backdrop for consumers to make the biggest purchase of their lives. Even if they choose to, they may find their banks are less forthcoming with mortgages.
Expect a flurry of profit warnings. Not necessarily because life is any tougher, but because a lot of other nasties can be swept up in a “kitchen sink job” - all blamed on the result. “Brexcuses” if you will
As for new build London resi towers, Brexit may prove to be the pin that finally pricks the bubble. On the London commercial development front, schemes already appear to be going back to the drawing board.
Big infrastructure schemes, such as HS2, the third runway at Heathrow and Hinkley Point had big question marks hanging over them. The turmoil may be an excuse to delay longer.
Expect a flurry of profit warnings. Not necessarily because life is any tougher, but because a lot of other nasties can be swept up in a “kitchen sink job” - all blamed on the result. “Brexcuses” if you will. I’m surprised England’s footballers didn’t use lack of political transparency and economic turmoil as an excuse for their performance.
So there are plenty of headwinds for - I guess - at least the rest of this year.
But at least we’re no longer due the pestilence, war and “punishment budgets” we were promised. The four horsepersons of the Apocalypse - George Osborne, Mark Carney, Barack Obama and Angela Merkel - seem now positively sanguine.
The reality is, construction is cyclical, entrepreneurial and, ultimately, essential. Stuff needs to be built. It’s just the timing and the price that are unknowns.
So, what if the pound slumps?: property will attract more inward investment. A few property companies go pop: somebody will come in and pick up the pieces. Cheaply. Not enough builders: establish a bilateral treaty with Poland (or train more). For a country unencumbered by EU red-tape and unsymmetrical “OJ” bidding rules (hands up any UK contractor that has won a job in France recently), we will be better equipped to adapt to changing local and world markets.
Vita continuat, as Boris might say.
Alastair Stewart is an equities analyst and commentator