The National Trust is planning to make 1,200 staff redundant as it looks to save £100million in the wake of the coronavirus pandemic.

The conservation and heritage charity, which has 5.6 million members, said it has lost almost £200m as a result of the Covid-19 crisis, which shut all of its houses, gardens, car parks, shops and cafes, and stopped holidays and events.

The trust said it had already saved millions of pounds through furloughing staff, drawing on reserves, borrowing and stopping or deferring projects, but still needs to make savings to keep it sustainable in the long term.

It has proposed £100m in annual savings, equivalent to almost a fifth of its annual spend, through changes to operations and cuts to staff and budgets.

Director general Hilary McGrady said the organisation will continue to care for historic sites, and tackle climate change, loss of wildlife and unequal access to nature, beauty and history.

Some 1,200 salaried staff face redundancy as part of £60m proposed pay savings – around 13% of the 9,500-strong salaried workforce.

The move, which comes after a decade which saw the National Trust nearly double in size, would bring staffing levels back to what they were in 2016.

The plans also include £8.8msavings by cutting the budget for hourly paid staff such as seasonal workers by a third.

The remaining £40m of savings will be made in areas such as reducing travel and office costs and IT spending, cutting marketing and print spending in favour of digital communications, and renegotiating contracts.

The trust has already announced it is stopping or deferring £124 million of projects this year.

The charity said it is refocusing its efforts to protect cultural heritage, with limited cuts to staff caring for houses, gardens and collections.

There will be a shift from a “one-size-fits-all” approach to properties, with reviewed opening hours at some places and in some cases running a pre-booked guided tour system for visits.

The trust will continue its ambition, announced in January, to step up action against climate change, cutting emissions to net zero by 2030, planting millions trees and creating green corridors for people and nature, it said.

It plans to restart the strategy in March next year, but Ms McGrady said the organisation would have to be “flexible” in achieving it.

She said: “We are going through one of the biggest crises in living memory.

“All aspects of our home, work and school lives and our finances and communities have been affected, and like so many other organisations the National Trust has been hit very hard.

“The places and things the National Trust cares for are needed now more than ever, as the nation needs to recuperate and recover its spirit and wellbeing.

“Our focus will remain on the benefit we deliver to people, every day.

“It is deeply upsetting to face losing colleagues and we are committed to supporting all of those affected.

“Sadly, we have no other course of action left open.

“In making these changes now, I am confident we will be well placed to face the challenges ahead, protecting the places that visitors love and ensuring our conservation work continues long into the future.”

Their report says the pandemic has exposed the tragic impact of years of inattention, funding cuts and delayed reforms.

All of which, it says, have left the social care sector as a poor relation to the NHS.

Meg Hillier MP, chair of the committee, said: “The deaths of people in care homes devastated many, many families.

“They and we don’t have time for promises and slogans, or exercises in blame. We weren’t prepared for the first wave.

“Putting all else aside, government must use the narrow window we have now to plan for a second coronavirus wave. Lives depend upon getting our response right.”

The report says the Department of Health and Social Care (DHSC) decision to discharge 25,000 hospital patients into care homes without ensuring they’d been tested for the virus was an example of the government’s “slow, inconsistent and at times negligent” approach to social care.

The committee also described the move as being an “appalling error”.

Culture Secretary Oliver Dowden told Sky News: “I don’t accept that characterisation. First of all, this idea that we were mass discharging people from hospitals into care homes is not the case – actually there were fewer people discharged from hospitals into care homes between February and April.”

He added: “I accept that we need to look back and we need to learn lessons, of course with hindsight there are things we could have done differently.

“What I don’t accept is the kind of characterisation that is made in that report – because for example, we discharged fewer people than the year before, because we put the testing in place subsequently, because the NHS providers have made clear that they would not have discharged people systematically on that basis.

“I think a more nuanced judgement is required.”

The committee has made a number of recommendations which it wants the DHSC, NHS England and NHS Improvements to respond to, including:

• A review into which care homes received discharged patients and how many subsequently had outbreaks
• The identification of national leads for all critical elements of the pandemic response
• Details of what will be done to ensure the needs of social care are given as much weight as those of the NHS

It is also asking for more information about the cost and function of private hospital contracts and the Nightingale hospitals. There are concerns, it says, that there has been “a lack of transparency about costs and value for money”.

The report also identifies a further lack of transparency around the availability of personal protective equipment (PPE), citing a tendency for the government to “over promise and under deliver”.

Meg Hillier said: “The failure to provide adequate PPE or testing to the millions of staff and volunteers who risked their lives to help us through the first peak of the crisis is a sad, low moment in our national response.

“Our care homes were effectively thrown to the wolves, and the virus has ravaged some of them.”

The Local Government Association represents over 300 councils across England.

Councillor Paulette Hamilton, vice chair of its community wellbeing board, said: “Social care has been on the frontline throughout this crisis but this report’s conclusions show that those who use, work and volunteer in these vital services were not given as much priority as the NHS from the outset.

“We cannot and must not allow any of these mistakes to be repeated again, if the country is to experience a second wave of coronavirus. Social care deserves parity of esteem with the NHS.”

A DHSC spokesperson said: “Throughout this unprecedented global pandemic we have been working closely with the sector and public health experts to put in place guidance and support for adult social care.

“Alongside an extra £1.3 billion to support the hospital discharge process, we have provided 172 million items of PPE to the social care sector since the start of the pandemic and are testing all residents and staff, including repeat testing for staff and residents in care homes for over-65 or those with dementia.

“We know there is a need for a long-term solution for social care and we will bring forward a plan that puts social care on a sustainable footing to ensure the reforms will last long into the future.”

The PAC said nobody would expect the government to get everything right in its initial response, but that it “urgently needs to reflect, acknowledge its mistakes and learn from them”.

Rishi Sunak, the chancellor, is considering whether to back a proposal supported by the housing minister, Robert Jenrick, and housebuilders, that would keep the scheme in place for an extra three months to clear the backlog caused by the lockdown of construction sites in the spring.

While the Treasury says no final decision has yet been taken, the chancellor is under pressure from large construction companies to help the sector emerge from recession and ensure that 18,000 buyers do not lose their chance to buy subsidised homes due to the delays linked to Covid-19.

Help to buy, a scheme that began in 2013, allows people to buy a home with a deposit of as little as 5% of the purchase price, with the government providing an equity loan of up to 40% in London and 20% in the rest of the country.

The housing ministry said that in the seven years between the launch of the scheme in the spring of 2013 and March 2020 the initiative had enabled 272,000 households to buy a new-build home.

“The government continues to work closely with all parts of the housing industry to understand the challenges and opportunities they face,” a housing ministry spokesman said.

The help-to-buy scheme aimed to help people to buy homes at a time when mortgage lenders were reluctant to offer loans without hefty deposits.

From the outset, however, it has been criticised for driving up house prices, subsidising people who would have bought a home anyway, and boosting the profits of the major housebuilders.

A National Audit Office report in 2019 said 63% of people buying a home under the scheme could have done so without help from the state, and official figures showed households with incomes of more than £80,000 a year were more likely to take advantage of the initiative than those with incomes below £30,000.

Help-to-buy transactions underpinnned about half of Persimmon’s sales in 2018 when the housebuilder racked up profits of more than £1bn. Vince Cable, then leader of the Liberal Democrats, accused the company of “pinching their profits from the public purse”.

The government responded to the criticism by announcing plans for a less generous replacement scheme that would be available only to first-time buyers.

The House Builders Federation said that of the 18,000 people likely to be affected by the December deadline about 40% would be ineligible for the new scheme.

David O’Leary, policy director at HBF, said: “Coronavirus forced the home-building industry to shut down, and while builders are now back on site, working within strict safe operating guidelines, completions have inevitably been delayed.

“It is an obvious response to extend the deadline to allow for these delays, but as a result of inflexibility of the rules thousands of home buyers look likely to miss out on the opportunity to use help to buy and so be able to purchase a new home.

“With mortgages for first-time buyers now few and far between, help to buy is more important than ever. Reducing the availability of help to buy will have a knock-on effect, undermining attempts to increase the delivery of new homes at a time when the economic benefits that the industry brings are desperately needed.”

Another day, another sadly predictable U-turn from the government of Boris Johnson. A few weeks ago ministers were encouraging the public to go abroad for their holidays. They did so without a comprehensive airport testing regime for passengers, unlike in many parts of the world. As restrictions have been lifted across Europe, countries have reported rises in Covid-19 cases. People returning from Spain, which has seen a spike in infections, now face mandatory quarantine. The farce means that the transport secretary will be one of those self-isolating.

Britain continues to record a higher number of coronavirus cases and deaths than Spain, which had one of the most stringent lockdowns in Europe. Madrid has every right to be frustrated. It is unclear why passengers from the relatively unaffected Canaries and Balearics are treated the same as those returning from Covid-19 hotspots in Catalonia.

This raises serious questions about what advice – and information – people ought to be given so that they can make informed judgments about travelling abroad. Spain was on the safe list last Friday, only to be taken off it on Saturday. Changes to quarantine rules need clear messaging, with as much notice as possible. Passengers returning from holiday who find themselves put into quarantine have every right to be angry, because they had little warning.

Individuals will find it hard to insure themselves in such circumstances. There is a compelling case for help from the state to cover for loss of work, as well as increased employment protections. Statutory sick pay is set at too low a level. There must be a better response than telling people to go on to universal credit if their employer refuses to pay them while they self-isolate.

The new normal needs a new politics. Mr Johnson ought to be lowering the level of uncertainty for the public, not raising it. Rather than governing by U-turn, ministers must prepare better for possible developments. The persistence of the coronavirus can take advantage of human instinct. It lingers such that the public believes that things are getting better, long after they are going wrong.

Mr Johnson’s error has been to follow public opinion in a pandemic rather than lead it. He had to be dragged to make face masks mandatory, and to implement passenger quarantine. Ministers shut down the community test-and-trace system at the start of the crisis and have created a new privatised one that is less effective than the NHS operation it replaced. Countries such as Israel and Japan, which had successfully controlled the spread of the virus, are now struggling to contain new outbreaks. These have been traced to super-spreader settings such as nightclubs as well as a lack of mask use and social distancing. England and Wales should look at the Independent Sage group’s “Zero Covid” approach [also reported by Owl] that Scotland and Northern Ireland have committed to. Otherwise the odds are increasing that renewed lockdowns, damaging to society and the economy, will be imposed.

The tax, which is paid by homebuyers, was temporarily removed on properties up to £500,000 in England and Northern Ireland by Rishi Sunak as the centrepiece of his summer financial statement this month.

Designed to boost housing transactions and demand for goods and services related to moving home – such as estate agents, solicitors, removals and the building trade – the tax holiday is set to last until 31 March 2021, at a cost to the exchequer of £3.8bn.

In its monthly assessment of house prices and property sales, Zoopla said the change had less of an impact on regional housing markets than in London. “This boost to transaction volumes has not been replicated in other regions, where average property prices are lower and less responsive to stamp duty amends,” the property website said.

“While stamp duty relief will support demand in higher value markets [on property priced up to £500,00] across southern England, it is unlikely to sustain demand indefinitely into 2021,” it added.

Figures published this month by the property website Rightmove indicated that Conservative-voting areas in the outer orbit of London would probably benefit most from the stamp duty cut.

Economists said at the time of the summer statement that cutting stamp duty could push up house prices, eroding the gains from the cut for buyers. According to the Resolution Foundation, an average homebuyer in the north-east of England will see no benefit from the change, while a typical London buyer will save more than £14,000.

The thinktank said the average first-time buyer already paid no stamp duty – because of an existing stamp duty relief for first-time buyers – except in London, and so those new to the property ladder would not benefit either.

The chancellor has said he used the cut to revitalise the housing market at a time when property prices are falling for the first time in eight years owing to the pandemic.

Answering questions this month from MPs on the Commons Treasury committee, he said: “We thought that people buying, moving, selling and then renovating would be good for jobs and economic activity. That is why we acted in the way that we did.”

Zoopla said that since the start of 2020, sales agreed were still 20% below the same period in 2019 – the equivalent of 124,000 lost sales worth £27bn in total since March.

By the end of the year, Zoopla said the lag was expected to have made a marginal recovery, with total transaction volumes for the year as a whole likely to come in about 15% below 2019.

Source: FT.com

UK government’s ‘Build, Build, Build’ plan

Boris Johnson and the UK government have just set out a new plan to support UK house building which covers three main initiatives. The first is a relaxation of planning restrictions which will make it easier to build homes. One aspect of this is the ability to convert buildings and land on Brownfield sites into new housing. Brownfield sites are those that were previously developed but are no longer in use, these could be former factories, retail or office sites.

The second part of the government plan includes an investment of £12 billion in order to build 180,000 new affordable homes. The final government initiative is the reduction of stamp duty (the tax on house sales) which means that stamp duty falls from 3% to 0% on sales below £500k which will save buyers £15k on a house sale.

This plan is a direct government response to try and help Britain out of the steep recession it is facing in relation to the crisis, through providing a greater amount of jobs in construction. And it makes sense for the government to back house building as nearly all of the inputs are domestically produced. Bricks, cement, labor can all be sourced in the UK generating a multiplier effect in the UK economy more widely for every pound spent on a new house.

I don’t expect this government support to stop anytime soon and I see the government’s new ‘Build Build Build’ plan injecting a new acceleration into UK house builders’ growth over the coming years.

The new government initiatives are the latest in a long list of government support for the house building industry. And over a substantial period the UK government’s schemes have helped to fill the pockets of the major house builders and delivered for their shareholders. All it takes is a look at UK house builder Berkeley Group’s (OTCPK:BKGFY) long term chart to see how successful they have been:

Source: Hargreaves Lansdown

What this means for housebuilders

The real question is, how will this impact housebuilders? I believe there are two main reasons why the UK’s housebuilders have done so well and why they will continue to do so. Firstly, they have managed the supply of building land and the demand for houses to maintain house prices and profits. Secondly the UK housebuilders have lobbied the government well and positioned their industry as a vital part of the UK economy and a key to growth. This has led to the series of government support initiatives which have favored the new build properties of the giant housebuilders.

The act of balancing the supply of available building land with planning permission obtained with the building of new houses has become an art form for the industry. As of 2018 The Big Issue reported that the government wanted to build a million new homes and would have to sacrifice green belt land in order to achieve this:

“A little digging into the latest financial reports of the top 10 housebuilders reveals a very different story. Between them, they have a staggering 632,785 building plots on their books, of which more than half have planning permission. At the same time, these 10 companies reported building a total of just 79,704 homes – which means they have, on average, eight-years’ worth of plots in their land banks at the current rate of construction.”

Small house builders account for around just 10% of the total of new house builds, which displays how the market is completely dominated by the big boys. These large firms have done so well to reduce the supply of new homes and build slowly, which means fewer houses are built comparatively in the UK and prices keep rising. All it takes is a quick look at the FTSE 100 constituents to find a mass of large housebuilders. This has happened since 1961 when the Land Compensation Act gave all uplift on development land to the existing landowners making land development and house building even more expensive and less accessible to small builders.

Source: thisismoney.co.uk

As house prices have boomed in recent years, driven by low interest rates and readily available mortgages you would expect the UK housebuilders to build more houses but the growth in new build volumes is very slow. In 2019 the three biggest UK housebuilders sold less than three per cent more houses than in 2018.

The companies that I believe are set to benefit most

I believe that the UK’s three biggest housebuilders – Barratt Developments, Persimmon and Taylor Wimpey are set to benefit from this new government support.

Barratt Developments was the UK’s biggest housebuilder by units completed in 2019. It recently announced a raft of positive news in a trading update for the year ended 30 June 2020. Although completed homes in the year were down to 12,604 units versus 17,856 homes in 2019 (-29%), the company’s forward order book is strong with total forward sales of 14,326 homes compared to 11,419 homes at the same point in 2019 (+25%). Barratt has year-end net cash of around £305m.

Persimmon trades on a P/E of 10x, and has traditionally yielded 9% dividend. The H1 dividend has been suspended but work has restarted on their sites and I expect a strong pick up in H2 2020 and into 2021. The company announced that it would not take any government support during the crisis which looks like a very positive sign for the future. Persimmon has a higher gross margin than its competitors and this contributes both to its strong dividend history and to its higher P/E ratio.

Taylor Wimpey has used the crisis as an opportunity to raise £500m in new equity investment and it is actively targeting new development opportunities. The company trades at a P/E of 7x, has historically made 20p earnings a share and paid dividends of 12p to 15p (6% to 8% yield) over the past three years with comfortable dividend cover. The recent cash raise gives them over £1bn in cash and current assets of over £3bn.

I would expect dividends to remain suspended or reduced in 2020 but look for a strong return in 2021. A housebuilder that is able to pay a dividend in H2 should see a strong positive market response in their share price and I believe the three companies mentioned above are best placed to achieve this.

Looking ahead and considering the risks

While house builders’ dividends are suspended and their shares have fallen through the crisis, I am bullish about the new government plan and I expect the larger housebuilder dominance to remain unchanged. The relaxation of planning restrictions plus diminished demand from a post-COVID, post-Brexit Britain may finally cause house prices to plateau or subside, however I do not believe this fall will be large. Crest Nicholson recently reduced the value of its land banks and work in progress to allow for a 7.5% fall in house prices. But if the major builders continue as they have in managing their land banks then the future will resemble the past; the supply of houses will remain constrained and house prices will most likely remain relatively steady. And the UK new build market will remain largely in the hands of the larger UK house builders.

As well as the effective cartel at the top of the industry, the other key factor for their long term success is the relationship of house builders with the government. The biggest factor of their success in recent years was the government’s ‘Help to Buy’ scheme which offered a 25% government backed low interest loan to first time buyers but only if they purchased a newly built house. This led to new build homes commanding a premium price further aiding the UK housebuilders.

The industry is expert at lobbying for further assistance. The CEO of Berkley had already asked for help back in June in the company’s Final Results:

House Building and construction can play a vital role in the broader economic recovery following COVID-19. This will require government support, similar to that seen following the 2008-09 financial crisis, including: the reversal of the property tax increases seen since 2014, a reduction in the bureaucracy and cost of planning, and direct investment into affordable housing.

With this new announcement his prayers have largely now been answered. The government will aid in removing barriers to building houses in order to provide more accessible housing for many demographics but most prominently young people. The house builders will be kept busy but will retain control of their developments and the speed at which they build them out. Finally the government has not taken the step of permitting local councils to build public housing stock, which once made up 40% of all UK housing. This is because the Conservative government is fundamentally opposed to public housing and is fundamentally in favor of encouraging private house ownership.

Instead the government’s turnaround plan is heavily focused towards the house building sector and the private house builders are being asked to lead Britain to an economic recovery.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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