Persimmon situation may accelerate burst of Help to Buy bubble - BLP Insurance comments on latest PMI
Following the release of today's Construction PMI figures, Phil Harris, Director at BLP Insurance, comments on the sector: "After skirting precariously close to the abyss, the construction sector has fallen into contraction (49.5) for the first time since March 2018. The main symptoms are a fear of a potential Brexit cliff face, lethargic commercial activity and major concerns about the long-term viability of Help to Buy.
"Despite Persimmon's bumper £1bn profit announcement last week, the contracting behemoth has been struck a hammer blow after Housing Minister James Brokenshire's assertion that its role in Help to Buy is to be reviewed. While the optics don't look good, especially as taxpayers money is involved, Persimmon has done what many others are doing - taken advantage of a well-meaning if ill designed initiative to boost profits.
"In dragging Permission over the coals, it seems that the government is finally waking up to the false economy that is Help to Buy. The scheme has been propping up the residential sector and keeping prices artificially high in an otherwise stagnating market. Its collapse could leave thousands of first time buyers in negative equity, with the aftershock having the potential to severely impact on the wider industry - blowing the government's optimistic housebuilding targets out of the water in the process.
"Elsewhere, the spectre of no-deal Brexit continues to loom large, gripping the industry in a state of trepidation. One very real threat is the visa implications for EU workers post-Brexit. The government had tentatively put forward plans to limit long-term visas to those earning north of £30k. In an industry already struggling to attract entry-level recruits and low skilled labourers, this misguided legislation would be extremely damaging.
"While the commercial sector continues to suffer, there has been a noticeable uptick in the demand for warehousing, a very clear indication of the shifting dynamic of the retail market, where online business is king and 'pick and pack' warehouse space is increasingly vital to prosper."
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Notes to editors
BLP offers housing warranty insurance and commercial development latent defects insurance underwritten by Allianz Global Corporate & Specialty SE. Our insurance is a compelling alternative to the 'traditional' 10 year new home warranty solutions and our commercial latent defects insurance product is the most comprehensive in the market. Unlike traditional new homes warranties, BLP's insurance covers the building - not the developer - and does not ask developers to pay up front registration fees, ongoing membership fees, bonds, guarantees or deposits. For claims, only proof of damage is required not proof of liability. BLP's cover is approved by all of the major British mortgage lenders.
We provide peace of mind for homeowners and protect their investment from the risk of undiscovered defects, because: the vast majority of our insurance policies are backed by an AA rated global insurer; we will have properly assessed the build project from design through to workmanship on site, to help minimise the chance of future defects; and if a defect does arise the homeowner won't have to prove who is to blame, just that there is a defect.
We have been providing construction insurance since 1999 and are owned by Thomas Miller, a world class insurance services business at the forefront of the insurance industry since 1885. BLP is regulated by the FCA and is an Associate Member of the CML