Guest Blogger - Aaron Morby

Volume house builders are getting back into the habit of delivering soaring profits to the obvious delight of their chief executives.

Are house builders losing the plot

07/03/2012 10:46:04

After three gruelling years chipping away at debt mountains to restore balance sheets, it is no surprise there is sense of survivors' relief and jubilation.

This comes as very welcome news because a healthy construction industry needs confident and financially secure clients.

But trumpeting rocketing profits and promising shareholders massive guaranteed payouts in the latest round of annual results leaves a bitter taste for hard-pressed trade contractors and suppliers.

House builders seem to have forgotten that their supply chains were also pushed to the brink by the housing collapse in 2008.

Trade contractors have had to cope with falling starts, slash staff numbers and still come up with cost cutting measures and big efficiency gains to keep the volume house builders happy.

Now is the time for some payback for those who played a part in restoring their fortunes.

This doesn't mean handing out cash willy-nilly, but it does mean restoring trade contractors' order books. This makes sense to everyone but the big builders.

Instead house builders are content to talk about holding down starts in the worst housing crisis for more than 50 years.

They are losing the plot.

The Government has bent over backwards to stimulate the market, using tax payers cash to buy unsold homes in the worst days of the downturn.

Now they are offering help to tempt first time buyers back into the marketplace and plan to give public land away to take the risk out of building new homes.
It all adds up to a massive financial package of measures for the house builders not seen anywhere else in UK industry outside of the banking sector.

Building starts have dropped again below the 100,000 mark, half what the industry was building in the peak and political pressure mounts for more action. Housing will be a big election issue.

Against this backdrop, it is unforgiveable that house builders choose to hold down starts and throw cash at investors to boost share prices.

Unless they change their tune, it will not be long before national newspapers start challenging fat cat house builders for lapping up precious public cash to boost profits rather than new homes.

It is a public relations disaster waiting to happen, which will taint more than a handful of stock market listed house builders.

Aaron Morby is the Editor of Construction Enquirer, the construction industry news website.

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5/2/2012 1:36:00 PM
Housebuilder Profits
By Tim
It is interesting to read the blog and reader the finacial papers to see the strong improvements in the big housebuilders profitablity, however it is clear to anyone involved in the supply chain to these builders that this improvement has been driven at the expense of some their suppliers & contractors. There have been a number of significant failures in the last few months of sub-contractors as they have struggled to make money from the work they do for these housebuilders. Your right, it is time that the housebuilders revisit how they deal with sub-contractors and suppliers. Driving people in their supply chain to the wall by squeezing the profitablity out their businesse is morally wrong and ultimately wrong for the housebuilders own business, but my bet is they won't change and their will be more casualaties of the way they do business.

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