Media plays down housing crisis – 160,000 house building jobs to go
Not a headline you might expect. And let’s hope the house building industry doesn’t shed 160,000 jobs, but it is looking ever more likely.
First let’s get one thing out of the way. The media is blamed for hyping the crisis we now find ourselves in. To hold that view is to simultaneously seek to shoot the messenger while keeping your head firmly buried in the sand.
The media may get it wrong sometimes. The media may misrepresent complex issues. And certainly the media will focus on bad news stories. But the rest, as they say, is advertising. And don’t we all just love to pay good money to read bad news.
But in this case I firmly believe the media is underplaying the scale and the broader implications of the house building collapse. There is a crisis and it is bad – how bad and how long it will take to recover from the damage who really knows?
Let’s look solely at the numbers of job losses being reported.
From media reports we see what appear to be frightening job losses – Persimmon to slash 2,000 jobs, Taylor Wimpey axes 900, Barratt slashes jobs by 1,000, 400 to go at Bovis, Redrow sheds 500 jobs and so on.
The rough scale of redundancies from the various announcements points to a figure of about 40% across the house builders – jobs being cut roughly in line with falling production – about 40%.
This is a frightening level of job losses, but the figures from house builders only tell part of the story.
The top 100 house builders directly employ about 50,000 according to the Housing Market Intelligence report and build about 60% of all new homes. From this we might think the industry overall employs about 70,000 to 80,000.
That is not the case. The rough rule of thumb is about four to five indirectly employed for each directly employed. This puts the numbers employed at around 400,000. Cut 40% of that and you get the jobs loss total of 160,000 referred to above.
Now you can argue about the amount of social homes being built, but in reality that wouldn’t impact greatly on the scale of the figures and with so much social housing tied to the private sector it is set for a rough ride also.
Just so you don’t think I plucked the 400,000 out of thin air there are other sources.
Admittedly, it is hard to put an exact figure on the total number employed in house building, just as you can’t put a figure on the number Polish working in the UK construction industry, but you can make informed estimates.
The best place to start is the Callcutt review published last November- which ironically enough was set up to examine if the housebuilding industry was able to meet the Government housing targets.
Calcutt uses data from the ConstructionSkills Network and Experian, which suggest there were 323,130 people working on building new homes in England in 2007.
England accounts for about 75% to 80% of homes built, so scaling up the number we get to 400,000 to 430,000 for the UK as a whole.
Now I haven’t seen a newspaper headline screaming that 160,000 jobs are under threat in house building – well not yet anyway, even though the numbers increasingly point to losses on that scale.
2 thoughts on “Media plays down housing crisis – 160,000 house building jobs to go”
As a major subcontractor working almost exclusively for the national housebuilders and developers we have not seen job losses yet of quite the same magnitude. Our current position is that we have shed about 20% of our workforce but we do anticipate that the situation is likely to get worse. The housebuilder numbers may be greater because there was a significant amount of duplication and overstaffing particularly with the companies which had been involved in recent takeovers and amalgamations – Barratt/David Wilson and Wimpey/Taylor Woodrow spring to mind. It is perhaps just as well that the media appear not to have realised the scope of the problems the industry faces. The greater concern is that the Government seems unaware of the damage to the Country’s economy through loss of consumer confidence that this downturn will have and in consequence are doing little or nothing towards finding a solution. Some sort of initiative to oblige the lenders to free up money for mortgages at affordable rates is the first and most urgent requirement.
Unfortunately there is not a lot that the government can do to free up the mortgage market – even cutting interest rates will not do that. (That will create a run on sterling creating further higher prices for everything we buy abroad)
The banks simply do not have any money to lend and are trying to keep within their capital requirments as they are forced to write down debt.
Bradford and Bingley is another Northern Rock waiting to happen.
The government is going to need to underwrite other building societies as things get worse to protect complete panic and runs by depositors on banks and building societies.
Credit card and cars loan debts are also going to start to cause massive losses for banks – again impacting mortgages.
Would you be happy as an uninsured lender to lend your money to the likes of Bradford and Bingley for 6% – 7% – I wouldn’t.
I rather get 5.5% from a well capitalised bank who doesnt do UK or US mortgages like Standard Chartered.
This is at the root of the credit crisis.
This is going to be a 1930’s style depression with massive deflation of all assets and wages. Houses can easily fall by 50% to get their ‘real’ cash flows if you had back to above 10%.
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