So, we voted out – and suddenly housebuilders (developers) shares plunged by 40%.
There does not seem to be an immediate link with voting out, but there is. We are in for an unstable time. There will be a recession and pundits differ only on whether it will be short (around 2 years) or long (anywhere from 5-20 years depending on who you listen to). House prices will reflect this by falling and mortgage rates may well rise, pushing some into negative equity and others wary of buying in case they fall into negative equity.
Housebuilders will also need to factor in higher import costs coming in the near future when EU trade reduces and new trade agreements have not begun, along with a local skills gap as workers from the EU dry up. Plus likely (possibly temporary)increases in income tax to cover lost government income from (again possibly temporary) shrinking markets. Not to mention higher unemployment benefits to those whose jobs currently depend directly and indirectly on those employers who would normally benefit from being in the EU.
To compound this, many developers have recently taken their huge profits out of their businesses by giving their directors massive bonuses.
All these factors cause a “perfect storm” for Local Plans and the general East Devon economy. Our Local Plan is predicated on continuous growth and increasing employment, fuelling a constant demand for new housing. And, more worryingly, there are penalties if this does not happen. If we (and all other councils) do not maintain a 5-year land supply, we are penalised by having our housing numbers INCREASED by 20%.
Another complication is that, currently, our council (and others) depend for income on the government’s “New Homes Bonus” – the more new homes it gets a developer to build, the more income it gets.
All this conspires to suddenly make our local plans hardly worth the paper they were written on.
Then there is devolution – which in Devon and Somerset also highly depends on housebuilding – having “promised” an extra 176,000 houses over and above Local Plans, and also dependent on continuous growth and constantly increasing employment. It is no coincidence that the Chairman of our Local Enterprise Partnership (LEP: the lead in the devolution bid) is Chairman of big developer, Midas.
Our LEP was also promised “jam tomorrow” funds (over 30 years) from the government AND anticipated masses of EU funding, all riding on the back of a new Hinkley C nuclear power station. All other devolved areas were given similar promises.
Our new government will now have its hands full attempting to negotiate its way out of the EU, rewriting or scrapping those EU laws we have (including those on environmental protection and workers rights) and trying desperately to work out where this notional extra £350 million a week is eventually going to be spent. It has already been promised to the health service, areas currently in receipt of EU regeneration funding and academic research programmes currently supported by EU grants. That is simply an arithmetical nightmare and almost certainly an impossibility.
This leaves East Devon in a precarious position: heavily dependant on new housebuilding and continuous year on year economic growth with constant employment growth and receipt of funds from a distracted government which has also promised to stem immigration – many having voted for this as its first priority. These two priorities will mean little time for other things. Not to mention having to deal at the same time with the implications of Scotland and Northern Ireland’s differing position on their future in the UK and EU.
The Local Plan and devolution deals are now almost certainly of much lower priority to this beleaguered government and this may well lead to unintended consequences the like of which our council and our LEP can only imagine and for which they have no plan B.
Many warned that economic growth and increasing employment between now and 2030, when our local plan ends, was unattainable and that at least one event would intervene for which there was no contingency. Few expected it to happen quite so quickly.