Help-to-buy should be axed as Persimmon profits pass £1bn | Nils Pratley

Persimmon’s £75m chief executive was too politically toxic to continue in post, but his £40m deputy will do just fine as the new boss. Welcome to the nuanced world of housebuilding in the age of help-to-buy, a place were Persimmon’s pre-tax profit of £1.1bn was not the most remarkable number in its 2018 results. That prize was shared by the 31% operating profit margin and the 53% return on capital employed, solid proof of how former chancellor George Osborne’s subsidy scheme has mostly benefited companies and their executives, not buyers of new homes.

New chief executive David Jenkinson can’t fail to be a cuter media performer than his tin-eared predecessor, Jeff Fairburn, but his own spoils from the ludicrous 2012 incentive scheme jar, to put it mildly, with the corporate chant that “Persimmon is changing”.

It’s nice that the housebuilder wants to address its sub-standard scores for customer service, but shouldn’t this thought have occurred when the executives, Jenkinson included, were racking up their millions? Similarly, it’s astonishing that it’s only now, after 150 senior managers have enjoyed their collective £500m windfall, that Persimmon wants all its lower-paid toilers to earn the full living wage.

Jenkinson will have to rub along on a £515,000 salary this year with no bonus or incentive top-up. The usual adornments will have to wait until 2020 and, presumably, will be re-cast in merely conventionally greedy form next time. He’ll survive.

So, of course, will Persimmon. If the new corporate do-gooding mantra feels a little windy (look, we’re even sponsoring Team GB for the Tokyo Olympics!), try the half-baked mutterings coming from government.

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James Brokenshire, the housing minister, is said to be “increasingly concerned” by Persimmon and the company’s approach will be “a point of discussion” as help-to-buy contracts are reviewed. Whatever that means, it’s several bricks short of an actual policy, let alone a description of the grounds on which Persimmon could be singled out for punishment.

Brokenshire should concentrate on the shortcomings of help-to-buy itself. There may have been an argument for stimulating demand for new houses circa 2013, but not now. There is ample evidence that help-to-buy homes are sold at premium, with the excess providing the rocket fuel for housebuilders’ profits margins. It’s time to unwind the market distortions – and safe to do so. Even if Persimmon’s return of capital were to halve, it would still has a strong financial incentive to keep building. Just call the whole thing off.



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