Social Housing Article

The Risky Business of Brexit

Despite the Prime Minister’s promise to make solving the housing crisis her single most important objective, it’s the ‘B’ word which continues to capture headlines and take centre stage as we hurtle towards the March deadline for leaving the EU.

Back in August, the Government published the first of a series of technical briefings, intended to ‘allow businesses and citizens to understand what they would need to do in a ‘no deal’ scenario, so they can make informed plans and preparations.’ While the Party line is still hopeful of a deal being reached, there’s serious acknowledgement that plans must be put in place for the possibility of the UK leaving the EU without an agreement.

Through the conversations we had at both the Labour and Conservative Party Conferences, it’s clear to us that many businesses and organisations are trying to make sense of either scenario, and planning for either outcome.

Housing associations like Stonewater are long term businesses, and we’re guided by a mission to deliver a social purpose. We exist because of social need, and we will continue to deliver homes and services for our residents and communities, through the good days and hard times, for as long as our services are in demand.

If the UK is catapulted – with a no deal scenario – into a new world in March next year, it will be up to housing associations to provide the leadership and manage these risks, making sure that we continue to provide homes and services to those most in need.

We’ve identified four key areas of risk that we are actively managing: finance – including liquidity and cost of borrowing, the ability of contractors to fulfil contracts, the availability of labour and the wider impacts on our residents.

For finance, liquidity is of prime importance in the short-term. And, in the longer-term, there is a risk that the cost of borrowing will increase with a reduction in funding available. We’re stress testing these scenarios and making sure we have adequate long term funding and short term flexibility to meet a range of possibilities.

Any volatility in the financial markets will impact on contractors and suppliers. Availability of labour, shortage of materials and increased costs arising from new tariffs, could all be likely issues facing our development and repairs contractors. With our business reliance on our contractors, their failure to deliver could have a significant impact on our day to day business and the services we provide.

And we are nothing without a strong labour force. New homes cannot be built without labour, and our services can’t run without our people. A recent CIPD report indicates that employers have already seen a decline in the availability of EU nationals and that filling vacancies is becoming tougher. This is already a real challenge for our care and support roles, where we are already over reliant on agency staffing.

Underpinning all of this is the possible impact on our residents. Pressures on the public purse could lead to reductions in public funding – hitting the NHS, local government, and further reducing services to some of our most vulnerable customers. And even our most economically resilient residents could face huge challenges in the event of a no deal – if interest rates, employment levels and the cost of living spiral.

These risk elements are far-reaching and enormously complex. But the housing sector has proven itself to be good at responding to change and planning for the future.

When the last recession hit the UK, the housing world changed almost overnight - unemployment rose and welfare reform hit our residents and communities hard. But housing associations didn’t stand still - we responded with a renewed ambition and a real determination to deliver for those in need.

Today, Stonewater builds one in every 200 new homes across the country, and our development pipeline will see us deliver 3,750 new homes by 2022, across a range of different tenure types. Ten years ago, we couldn’t have imagined that we’d be delivering our social mission at the scale we do today.

And now Brexit requires us to think differently once again.

It requires us to look once again at our business response, and to question how we can best deliver our homes and services to those in need in the face of these real risks. Is our business response is focused purely on risk mitigation or are there also opportunities that can be exploited?

We’re looking at Brexit from both these perspectives – exploring ‘open book’ contracts to offer greater flexibility; improving supply chain performance through better information flow and co-ordination; making better use of technology and accelerating new ways of working; exploiting the potential for social housing development to benefit from any decline in private house building activities.

Like Brexit itself, there is a myriad of possibilities and outcomes. Managing the risks and realising benefits will take expert balance and a steady nerve. With the EU leaders’ summit now rapidly approaching, we need to be clear about our appetite for risk and be ready to take the next step forward into this brave new world.

By David Blower
Executive Director of Corporate Services