What decisions could the UK actually take to avoid managed decline?

[Broucek]

An entrepreneur selling to a larger business is a natural part of capitalism. Many large companies themselves grew to their current size due to mergers and acquisitions.

This is often a good thing - access to additional markets, synergies and so on. Some things just work better as part of something large. It doesn't always work, of course, but there seems to be a lot of cynicism about this in this thread.

And it's generally better for an entrepreneur to start a business and sell once it shows promise than not start it at all.... And it doesn't follow that s/he will then retire - another enterprise may be started. These people are, in general, wired differently to the rest of us!

 

[brad465]

Introduce a land value tax, something Martin Wolf of the FT has advocated today. Land doesn't go anywhere (if you ignore plate tectonics over millions of years), and too many assets exist that do nothing for the value they gain, other than just sit there. This also leads to less investment in productive stuff, which among other things will have contributed to our current energy crisis (i.e. more money made in unproductive asset ownership than productive energy facility installation/expansion).

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I have long been a supporter of taxing land value. Such a tax would be economically efficient and morally just. But it has been politically impossible...

 

[HSTEd]

Introduce a land value tax, something Martin Wolf of the FT has advocated today. Land doesn't go anywhere (if you ignore plate tectonics over millions of years), and too many assets exist that do nothing for the value they gain, other than just sit there. This also leads to less investment in productive stuff, which among other things will have contributed to our current energy crisis (i.e. more money made in unproductive asset ownership than productive energy facility installation/expansion).

I very much doubt that it would function the way that he envisages.

And I'm not sure at all how this will dealw ith the fact that current distortions in the property market are entirely created by the state.
I'd think it was far more likely that all gardens would be abolished and there would be a strong economic driver to making housing resemble the Kowloon Walled City.

Ultimately we no longer live in an economy where land values are a significant portion of the productive part of the economy.
The social value of uses of land is more important than the economic value of land use and it is impossible to quantify in any kind of sensible manner.

Rather than creating a gigantic bureaucracy, with all the inherent distortions, to try and recycle the property bubble into the productive economy - can't we just deflate the property bubble?

 

[The Ham]

I very much doubt that it would function the way that he envisages.

And I'm not sure at all how this will dealw ith the fact that current distortions in the property market are entirely created by the state.
I'd think it was far more likely that all gardens would be abolished and there would be a strong economic driver to making housing resemble the Kowloon Walled City.

Ultimately we no longer live in an economy where land values are a significant portion of the productive part of the economy.
The social value of uses of land is more important than the economic value of land use and it is impossible to quantify in any kind of sensible manner.

Rather than creating a gigantic bureaucracy, with all the inherent distortions, to try and recycle the property bubble into the productive economy - can't we just deflate the property bubble?

I do wonder if there was something which could be done to incentivize local areas to accept more housing.

However any such incentive should be linked fairly locally. For example in one district council area a decent percentage of homes where built in a small town, however the major town in the district then got the funding for a new sports centre. All well and good you may think, however it isn't viable to get to by train (the sorts centre is 2 miles away the train station), there's no buses to the major town and even driving off peak takes quite a long time (13 minutes). In addition to getting there being hard, the swimming pools (there's three of them) are significantly utilised out side of school time by swimming lessons, making it very hard to use the pools for swimming as a family.

As such taking the above example, if the minor town were to be gifted a swimming pool in exchange for an extra 750 homes (putting the population at about 12,000 so a viable population for a pool), there's a good chance that there would be a lot less opposition to the homes being built.

For that sorry if level of investment to be provided there would likely need to be national government offering something like 5 years of council tax funding to the community as well as the current developer contributions.

However, with the limited investment by all levels of government in things like sports facilities, active & sustainable travel, cultural infrastructure (including libraries) and so on, there's a lot of areas where they have grown in size but don't have the facilities which would have been normal for places which grew to that size over 50 years ago.

 

[HSTEd]

As such taking the above example, if the minor town were to be gifted a swimming pool in exchange for an extra 750 homes (putting the population at about 12,000 so a viable population for a pool), there's a good chance that there would be a lot less opposition to the homes being built.

It's going to take a very large number of amenities to get a respectable number of homes at that rate of exchange.
Building a thousand at a time is not going to get us anywhere when our deficit is in the millions and growing by 100,000 or more annually.

The bureaucratic overhead of so many small projects alone will kill the state's ability to drive them forward.

All localism is likely to achieve is paralysis.

However, with the limited investment by all levels of government in things like sports facilities, active & sustainable travel, cultural infrastructure (including libraries) and so on, there's a lot of areas where they have grown in size but don't have the facilities which would have been normal for places which grew to that size over 50 years ago.

Unfortunately all these amenities have become expensive to operate - we don't have the huge supplies of cheap labour we once had.
And with the energy system debacle running a swimming pool is more expensive than it has been in a very very long time.

 

[Bletchleyite]

Unfortunately all these amenities have become expensive to operate - we don't have the huge supplies of cheap labour we once had.

I get that with regard to swimming pools, but libraries don't. You can get by with one librarian, and they aren't generally high paid, it's the sort of job people do as a labour of love. I suspect what's doing it for libraries is the ease of obtaining information online (thus killing the reference aspect of a general public library rather than a specialist one like a university library) and of buying books, including used ones, on Amazon etc (plus the effect of the likes of Kindles). I've not used a public library for about 25 years, and I doubt I'm alone, I buy books online and donate them to charity shops once I've read them.

You do have to heat the building, I suppose.

One way they could perhaps save money on libraries is by incorporating them into schools, though they'd need to contract academies to do it, I guess. A lot of public library users are kids, so getting a book at the end of the school day would be easier so encourage reading more, while they could perhaps open for a couple of hours on a Saturday morning for others to access, perhaps volunteer-staffed.

Indeed, I bet you'd get volunteer librarians for a "full fat" County Library, probably more easily than you'd get paid staff on minimum wage. Plenty of older people would happily do that. I could see that I would once retired, maybe one day a week. Books and reading are something many people are really passionate about, and that passion makes volunteers quite easy to get.

 

[telstarbox]

In my local area the county council requests a per-dwelling contribution to schools, libraries and other community facilities each time a development comes forward.

 

[Bletchleyite]

In my local area the county council requests a per-dwelling contribution to schools, libraries and other community facilities each time a development comes forward.

That's the norm (it's called planning gain) and contributes to lots of things including roads and public transport. The problem is that it is not an ongoing charge (that's what Council Tax is for), it's for "pump priming", e.g. typically it subsidises a bus route for 3-5 years, by which time it's either found its feet or been withdrawn.

The main problem with this sort of thing is capping, which is an affront to local democracy by forcing Councils to cut even if a left-wing Council is elected, because they can't increase Council Tax to pay for the services people desire. If we had a written Constitution (we should, by the way) interfering in another level of devolved democracy would breach it in my book. If you want low Council Tax and thin services, you can exercise your vote locally by voting Tory, Taxpayers Alliance etc.

 

[RT4038]

That's the norm (it's called planning gain) and contributes to lots of things including roads and public transport. The problem is that it is not an ongoing charge (that's what Council Tax is for), it's for "pump priming", e.g. typically it subsidises a bus route for 3-5 years, by which time it's either found its feet or been withdrawn.

The other problem is that once the 'Planning Gain' amounts have been factored in, the houses to be developed are very expensive, hence why so many large homes get built on new developments.

 

[Bletchleyite]

The other problem is that once the 'Planning Gain' amounts have been factored in, the houses to be developed are very expensive, hence why so many large homes get built on new developments.

I don't think that's entirely true, as proportionally to the cost of the house it's not a big sum. Big houses are just more profitable.

 

[RT4038]

I don't think that's entirely true, as proportionally to the cost of the house it's not a big sum. Big houses are just more profitable.

The smaller the houses, the more houses. The more houses the more planning gain (more people, more connections etc). So each house bears a larger proportion of planning gain in its sale price. You are right that for various other reasons too, larger houses are more profitable.

 

[Bletchleyite]

The smaller the houses, the more houses. The more houses the more planning gain (more people, more connections etc). So each house bears a larger proportion of planning gain in its sale price. You are right that for various other reasons too, larger houses are more profitable.

Stuff like small and large houses having the same number of "expensive bits" i.e. kitchens and bathrooms.

Interestingly the balance of smaller and larger differs from north to south, because if you're in a place where two-beds go for £150K it's very difficult to make ANY profit out of a new one, whereas if you can sell a two bed for £300K it's very profitable, given that the land isn't a big part of the cost (other than in expensive bits of e.g. London) and a house costs about £100-150K to build. (It is surprising builders don't more to more prefabricated houses, as it'd reduce this difference - the need for craftsmanship* in building new houses is what considerably escalates the cost, and a bigger house has a similar number of doors, kitchens, bathrooms etc as a smaller one).

* Yes, I know, debatable given the quality of many of them. But what I mean is that there's no concept of mass production in most UK housebuilding, each house is built separately, entirely manually (bar power tools), by people. It's very people-heavy.

 

[HSTEd]

* Yes, I know, debatable given the quality of many of them. But what I mean is that there's no concept of mass production in most UK housebuilding, each house is built separately, entirely manually (bar power tools), by people. It's very people-heavy.

Mass-produced housing of the labour-saving variety tends to have a distinct look, and I don't think planning authorities particularly smile upon proposals to throw up thousands of buildings with not a brick in evidence.

We don't live in a world where the local government will let you buy a kit from Ikea (other retailers are available) and throw it up on a randomly selected plot of land.

 

[Bletchleyite]

Mass-produced housing of the labour-saving variety tends to have a distinct look, and I don't think planning authorities particularly smile upon proposals to throw up thousands of buildings with not a brick in evidence.

We don't live in a world where the local government will let you buy a kit from Ikea (other retailers are available) and throw it up on a randomly selected plot of land.

Though those things are things that can, and perhaps should, change.

 

[najaB]

Stuff like small and large houses having the same number of "expensive bits" i.e. kitchens and bathrooms.

Yes. But the profit on four smaller houses is going to be more than on three larger houses since the selling price isn't based on a simple £x/sqm basis.

 

[Bletchleyite]

Yes. But the profit on four smaller houses is going to be more than on three larger houses since the selling price isn't based on a simple £x/sqm basis.

It isn't, because the construction cost isn't either. Larger houses make more profit, which is why more larger houses are built. Why else would it be? Do you not think developers would build more smaller houses if they thought they'd be more profitable?

 

[HSTEd]

It isn't, because the construction cost isn't either. Larger houses make more profit, which is why more larger houses are built. Why else would it be? Do you not think developers would build more smaller houses if they thought they'd be more profitable?

Ultimately the developers only have limited control over what houses they get to build. The ultimate control is held by the state.

The primary driver of objections to a local housing development will be the number of units built - building a smaller number of larger houses is likely to lead to less mobilisation of the local NIMBY population.

Both because number of houses is the scary sounding number, and because smaller houses are associated with the undesirables of the lower socio-economic orders.

 

[Dr Day]

We don't live in a world where the local government will let you buy a kit from Ikea (other retailers are available) and throw it up on a randomly selected plot of land.

There are plenty of 'off the shelf' plans for self-build houses so you can do the first bit, however the second bit depends on you obtaining a bit of land and getting planning permission to build on it. One of the key differences in my observations about housing here and in continental Europe (aside from far great acceptance and higher build quality of apartments for 'middle class' family living) is the intermediary of builder-developers who buy acres of land at a time, get planning permission for estates, build lots of houses, and then sell them. If land owners sold serviced plots directly to individuals, who each got their own architects or builders in things might be a bit different, although probably less efficient.

Larger houses make more profit, which is why more larger houses are built

Doesn't it depend, at least a bit, on the market demographics? If there is a market for more expensive 4-bed family homes, the developer builds them rather than say studio flats? Developers won't build things that they can't sell, even if they have permission to build them. Genuine question - how much do developers build to what types of dwellings the local authority say are needed, therefore what presumably will sell and get planning permission for compared with what the developers think they can make a profit on given the land and construction cost?

 

[Bletchleyite]

The market will influence it too, but you can't get away from the fact that in some parts of the country you can make very little or no money from small houses because they cost as much to build as you can sell them for. I would imagine the housebuilding industry is suffering higher costs as a result of the labour shortage too.

 

[Sm5]

One problem in the UK I think is that many entrepreneurs in the UK seem to set up their businesses with the explicit intention of selling up once their business is worth enough that they can live off the proceeds of their sale. As a result, you get many start ups in the UK, but few transition into being large companies that generate large numbers of jobs and income for the UK economy. If they do end up growing into large companies under their new owners, the profits end up getting exported overseas. This seems to be a particular issue in the tech sector.

The problem is, I am not sure how the government tackles this issue. Changing tax laws to discourage entrepreneurs from selling up would probably mean they never set up the business in the first place.

The problem here is encouraging British companies to pony up and buy them.
We are very entrepreneurial, but not willing to spend or invest…. Or worse, take a dim view on our own inventions and think they arent worth it, as they dont see international potential.

Ive worked international my whole career, I have travel stories people wouldn't believe… and thats the truth… I’m now into my second ever British job… and quite simply the staff don't believe my experience, because their own experience of global trade doesn't go beyond a Magaluf weekender.

I could goto the US, do a deal on a hand shake, with someone Ive met once..get the paperwork done in a week and be executing in two.

In the UK No one sees the value, thinks they can do it themselves, wont pay and if they do, they haggle like its the Apprentice Final.

In Europe they are much more pragmatic, perform due diligence, it goes a little slower, but the deals get over the line, as they see the need, value.

needless to say, first thing I did in this job, was let the other guy take UK territory, he’s over the moon, thinks its gods gift to sales comission. I took South Africa, amongst others. They speak english, sit in pretty much in the same time zone, sell to the same UK customers and have a day rate 1/10th ours, so are more than happy with buying a bit of software that serves their UK customers and has UK support… so far i’m way ahead and the other guy has no idea why i’m doing so well, complains bitterly how hard every deal is to get over the line at any sensible rate… my margins generally on target… I get on a plane, he gets nights out in Manchester, Leeds, Brum etc. We are both happy but he’s just no scope.

I’m only in my 40’s yet sometimes think i’m a wolly mammoth, theres just fewer and fewer people out there who have international expertise in higher positions… they are retiring, or leaving, but I see no youngsters beneath them going through those ranks.. the oppourtunities are no longer there.

lack of global experience in any kind of professional role is a very British failing, we let the old networks wither as empire receded. The days of British influence shrink as each new overseas generation rises, with no exposure of British links, they have American, Chinese, Russian or EU influence.

Similarly our expertise has sat back on revenues at home, gradually shrinking back, then closing, merging or selling up, taking away that global exposure.
Other occasions we see enterprises spin up international based on glamour than fact.. how many British businesses take on NYC or California with a very British offering, then immediately fail.. bad research of the market, demand, approach or more importantly the costs and margin?

Brexit harmed us much more… those foreign owned entities liked having a european head office in the UK, for EU sales. American mid-sized especially would handover all non-American business, thus giving Asia, MEA to us too.. post Brexit, the HQ is in Amsterdam, Paris or Dublin.. the UK has become a regional office and your only chance of personal growth is to become a lower paid Head of a very crowded UKI…

 

[HSTEd]

The market will influence it too, but you can't get away from the fact that in some parts of the country you can make very little or no money from small houses because they cost as much to build as you can sell them for. I would imagine the housebuilding industry is suffering higher costs as a result of the labour shortage too.

I think it is far more likely that housebuilders have concluded that the number of units they can build is largely fixed and they can get the most money building smaller numbers of larger houses.

Housebuilding technology and practice, either by developer action or state action, is stuck in the 1950s.

Especially in the likes of Switzerland and Central Europe, one thing that strikes you is how pervasive small cranes are for regular house construction - whereas in Britain they still tend to prefer simply having personnel lug bricks around.

Prefabricated concrete or steel frame buildings, like those usd to build commercial buildings - would absolutely slash the cost of residential housing.

Especially if factory assembly was brought to bear on bathrooms/kitchens and unnecessary pipework and fittings were eliminated (no gas, probably forced air heating).

 

[DynamicSpirit]

Housebuilding technology and practice, either by developer action or state action, is stuck in the 1950s.

If that's true, then that suggests a great business opportunity waiting for you...

 

[Bletchleyite]

(no gas, probably forced air heating).

What you really want to do is really thick insulation (say 8" of fireproof Kingspan on every outside wall with render over the top) and then all you would need is a small electric resistive heater in each room for really, really cold days. Owners of houses to the Passivhaus standard barely need to heat at all, they hardly lose any.

Forced air could still be an option because it can be combined with heat recovery ventilation which is an important part of this type of home, because without it you don't get natural ventilation as you plug up all the normal draughts you get in a regular house.

 

[High Dyke]

Prefabricated concrete or steel frame buildings, like those usd to build commercial buildings - would absolutely slash the cost of residential housing.

That type of construction isn't new. Many houses were built after WW2 using a pre-fab design. Whilst I accept design may have evolved one of the issues faced when trying to purchase this type of building is obtaining a mortgage, if required. I tried to buy such a house many years ago, but couldn't find a mortgage company that would provide for such a property.

That said flat-packed buildings are becoming popular. There's one being built in the street next to mine. The wall panels delivered by lorry and attached to the concrete base.

 

[Bletchleyite]

That type of construction isn't new. Many houses were built after WW2 using a pre-fab design. Whilst I accept design may have evolved one of the issues faced when trying to purchase this type of building is obtaining a mortgage, if required. I tried to buy such a house many years ago, but couldn't find a mortgage company that would provide for such a property.

That said flat-packed buildings are becoming popular. There's one being built in the street next to mine. The wall panels delivered by lorry and attached to the concrete base.

Some were built in the Oxley Park estate in Milton Keynes, and they've been disastrous for the purchasers - all manner of leaks and condensation issues for instance, with some having to be totally rebuilt. However I think that stems more from trying to do it on the cheap, which has produced something that looks rather like the sow-ugly corrugated steel buildings in Netherfield and is long term probably destined as a sink estate. However, it doesn't have to be like that if you don't cost-cut to the bone.

Oxley Park: https://www.google.com/maps/@52.010...=191.8542&pitch=0&thumbfov=100!7i13312!8i6656

Netherfield: https://www.google.com/maps/@52.020...90.756065&pitch=0&thumbfov=100!7i13312!8i6656

 

[SJL2020]

The problem here is encouraging British companies to pony up and buy them.
We are very entrepreneurial, but not willing to spend or invest…. Or worse, take a dim view on our own inventions and think they arent worth it, as they dont see international potential.

Ive worked international my whole career, I have travel stories people wouldn't believe… and thats the truth… I’m now into my second ever British job… and quite simply the staff don't believe my experience, because their own experience of global trade doesn't go beyond a Magaluf weekender.

I could goto the US, do a deal on a hand shake, with someone Ive met once..get the paperwork done in a week and be executing in two.

In the UK No one sees the value, thinks they can do it themselves, wont pay and if they do, they haggle like its the Apprentice Final.

In Europe they are much more pragmatic, perform due diligence, it goes a little slower, but the deals get over the line, as they see the need, value.

needless to say, first thing I did in this job, was let the other guy take UK territory, he’s over the moon, thinks its gods gift to sales comission. I took South Africa, amongst others. They speak english, sit in pretty much in the same time zone, sell to the same UK customers and have a day rate 1/10th ours, so are more than happy with buying a bit of software that serves their UK customers and has UK support… so far i’m way ahead and the other guy has no idea why i’m doing so well, complains bitterly how hard every deal is to get over the line at any sensible rate… my margins generally on target… I get on a plane, he gets nights out in Manchester, Leeds, Brum etc. We are both happy but he’s just no scope.

I’m only in my 40’s yet sometimes think i’m a wolly mammoth, theres just fewer and fewer people out there who have international expertise in higher positions… they are retiring, or leaving, but I see no youngsters beneath them going through those ranks.. the oppourtunities are no longer there.

lack of global experience in any kind of professional role is a very British failing, we let the old networks wither as empire receded. The days of British influence shrink as each new overseas generation rises, with no exposure of British links, they have American, Chinese, Russian or EU influence.

Similarly our expertise has sat back on revenues at home, gradually shrinking back, then closing, merging or selling up, taking away that global exposure.
Other occasions we see enterprises spin up international based on glamour than fact.. how many British businesses take on NYC or California with a very British offering, then immediately fail.. bad research of the market, demand, approach or more importantly the costs and margin?

Brexit harmed us much more… those foreign owned entities liked having a european head office in the UK, for EU sales. American mid-sized especially would handover all non-American business, thus giving Asia, MEA to us too.. post Brexit, the HQ is in Amsterdam, Paris or Dublin.. the UK has become a regional office and your only chance of personal growth is to become a lower paid Head of a very crowded UKI…

Very interesting perspective, thanks for posting.

 

[najaB]

However I think that stems more from trying to do it on the cheap, which has produced something that looks rather like the sow-ugly corrugated steel buildings in Netherfield and is long term probably destined as a sink estate.

This, more than anything - the idea was to get as many houses built as quickly as possible. As any software engineer would tell you: of cheap, fast and quality you can only have two.

 

[Broucek]

As any software engineer would tell you: of cheap, fast and quality you can only have two.

I'm a management consultant and also work to that principle!

 

[HSTEd]

If that's true, then that suggests a great business opportunity waiting for you...

Given that the state is unlikely to allow such houses to be built, I doubt it.

 

[Bletchleyite]

Given that the state is unlikely to allow such houses to be built, I doubt it.

The state cares that the houses look a bit like traditional houses. It doesn't overly care if those brick frontages were actually similar looking terracotta cladding, nor really if the roofs look like tiled roofs but are put on as panels. (It quite rightly cares if said cladding is "burny", but that's a different issue).

It's more mortgage companies you need to convince. That's to some extent understandable as historically alternative construction methods have been a bit rubbish.