The business secretary reckons we face a crisis that is the economic equivalent of war. Shame then that politicians have all but surrendered our future to the pluck of bankers
The world is full of contradictions. This month we had travellers on a gypsy camp in Essex who wanted to stand their ground and not travel. There is a so-called “World Series” league for baseball in America for which only teams from the US are eligible to play. Meanwhile in spite of the levels of commercial activity from developers falling at a rate that should make the chancellor whip out his worry beads, there is little comment or help from those in power. Is it the ultimate contradiction when we have the business secretary describing the state of the economy as being on the equivalent of a war-footing (as he did at the recent Liberal Party conference) but everyone continues to ignore one of our biggest sectors?
But should the Coalition be panicking? The news is not inconsequential after all. Around a third of commercial developers have recorded a drop in activity in August and it has fallen at its sharpest rate for 11 months, according the latest survey from Savills.
Activity levels from developers are falling at a rate that should make the chancellor whip out his worry beads
There are pockets of growth, with London up 11.7%, although everywhere outside the capital saw drops of between 3.5% and 4.1%, and most worryingly, private sector development decreased for the first time in five months. One surprising thing to come out of the same survey is that the index tracking developers’ expectations signals only a slight deterioration in confidence brought about by the results. Could it be that expectations were so low in the first place they had no further to drop or is it just the cheery, optimistic disposition of those who buy and sell commercial property (which is oh-so-familiar to anyone who has ever attended Mipim)?
Negative commentary has been just around the corner throughout the summer and is now greeting the autumn. Earlier this month, talk of a double dip recession and a return to the misery of 2008 was dominating the headlines. The sight of good news proving to be as rare as a German taxpayer praising Greek economic prudence.
From my own travels I find the true picture to be mixed. No one is optimistic but frankly that has never been the character of our industry. We are a bit like the farmers who moan when it rains and complain when it’s sunny. However, some are genuinely in trouble at the moment and those of us who remain independent and are not looking for a sale of some kind are a rarity in the world of construction consultancy. Those who sought safe sanctuary in the Middle East do not necessarily look with unbridled joy on the revolutions of the summer. In Libya and Egypt, carefully nurtured client relationships now in tatters have been the final nail in the coffin for many a business, although for others there is reconstruction work and new opportunities.
People in our industry are a bit like the farmers who moan when it rains and complain when it’s sunny
In spite of all the gloom from the economists at the macro level, back in London, Helical Bar has just let 65,000ft2 of office space to seven tenants in Aldersgate. Morgan Capital Partners has just bought a 25,000ft2 development site in Mayfair with an asking price of £25m, and housebuilders the Berkeley Group said at its AGM that it was on target to achieve double its pre-tax profits by 2013, two years ahead of schedule. So the figures and surveys are appalling but there is a bright spot: developers do not seem to have had their confidence further eroded, some contractors are predicting growth and the buying and selling of commercial property is still taking place.
The reality is that most of us operating in the real world dismissed the hype of sudden and miraculous growth a long time ago. We have history to draw upon so we know it is going to take several years before we get on an even keel and even consider growth outside of the capital. If the government is lucky, this will take place just before the next election. But the government is not foolhardy enough to give those kind of timescales when cuts are starting to hurt in the regions.
This is probably what Vince Cable was referring to when he declared that we are in the economic equivalent of war. In our industry it is seems to be a long, drawn-out battle, like wading through mud in the Somme, rather than the shock and awe of military or fiscal victory. Perhaps, with parts of the South-east still growing, we can hope that this slow plod towards victory provides the energy for further growth throughout the UK; it has before and it may again. Unfortunately, now more than ever, all our futures are in the hands of the banks. And as the comedian Lee Mack once said: “A bank is a place that will lend you money … if you don’t need it.”
Richard Steer is chairman of Gleeds Worldwide