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Home / Latest News / Alan Collett, president of the Royal Institution of Chartered Surveyors, on the Welsh economy

Alan Collett, president of the Royal Institution of Chartered Surveyors, on the Welsh economy

Having just concluded a meeting with the First Minister and members of the Welsh Government Alan Collett, president of the Royal Institution of Chartered Surveyors (RICS), sips his Guinness and surveys the economic landscape.

This visit to Wales will be his last before he steps down. It is part of a global tour he’s making to hear members views at first hand.

The RICS has 98,000 members globally and another 80,000 trainees and students of which there are 5,000 here in Wales.

“We have very good relationships here with the universities, particularly with Cardiff and the University of South Wales who run accredited courses. These open up opportunities for them to work here in Wales, the UK or anywhere in the world because their skills are in demand everywhere,” Mr Collett said.

He is no stranger to Wales and the policies of the Welsh Government on building legislation that impacts on his members.

He said: “I have seen comments on the additional costs, but within a UK context it’s up to each regional government to determine what its priorities are – for example, installing sprinklers which add to costs.

“In a way this doesn’t matter as long as there is still land value left at the end of the equation because a homeowner, regrettably, doesn’t see the value of the higher level of regulation and the resultant high cost.

“So a home built to these new standards will not necessarily sell for a great deal more than an older home. That can push land value down.”

He added: “In some parts of the UK, including Wales, it may push land values down to a point where nobody is going to sell land, and houses won’t be built – but that’s an issue for politicians to consider.”

On the broader issue of environmental standards and the increased costs of building to higher energy efficiency standards, he said: “I think it’s a different matter because the public will start to see the benefit of the much lower costs. It’s perfectly possible today to build a house which will have an energy requirement of a quarter or less than an existing property.

“I think the average energy cost in a house is now in the order of £1,300 a year. If this can be reduced by three quarters it is a real benefit which people will be prepared to pay for once they understand it will be delivered.”

But are people confident the house they buy will operate at a level of efficiency the builder, scientists or even the government tells them it will?

He said: “We haven’t built enough of them yet to know, but I would believe that in 10 years’ time houses built to these modern standards will sell at a premium to an identical one built to earlier standards.”

Energy costs will carry on rising. Why then would someone buy a house that is going to cost £2,000 a year to heat when you could buy one that costs £500 a year to heat?

He said: “I think people will pay more, just as some will pay more for a more fuel efficient car.”

He adds: “I see no cause for concern about the legislation here in Wales because anything new takes time for people to adapt to it, and it certainly isn’t clear to our profession that the public is calling for these standards.

“If they are not calling for them there is a question mark over whether they will pay for them when it comes to going into an estate agents or on to the site office.”

Consequently, he predicts, there will be a temporary reduction in confidence and perhaps a temporary reduction in volume – although the volume of new housing starts is low anyway, mostly because of the lack of confidence in the economy.

The difficulty in obtaining high loan to value mortgages is, he points out, a much bigger factor than the change in the regulations.

He said: “But at a time of lack of confidence and low volumes it must have an additional effect, but only time will tell how big.”

Having raised the spectre of the economy it seems an opportune moment to ask what the impact of the recession has been on his members here in Wales.

He said: “Our members work in a huge variety of areas but the biggest are construction, investment, agency, commercial property, the estate agency members, farm advisers and agricultural agents. These are sectors that have seen dramatic falls in volume.

“In the case of commercial and residential property these have seen falls in profit especially in upland farms – perhaps not to the same extent in some of the larger farms, but the Welsh farming industry is more heavily influenced by small farmers than any of the other countries within the UK. So they have all seen reductions in their turnover and profitability and that has had an impact on our profession.”

It can, he believes, be ameliorated by working outside Wales or by working more efficiently.

He explained: “I don’t have a figure for Wales alone, but for the UK as a whole something like 2,500 of our members out of a UK total of 70,000 have gone to work in other countries since 2008.

“They have taken their recognised qualification to another economy. Although in Western Europe we may have static or declining economies there are economies in the world where growth is strong.”

In support of this contention he cites growth in the construction sector in the Middle East and Far East, with China and India leading the field in career opportunities.

“The scale of ambition and need in some these countries dwarfs anything we have here in the UK or indeed Western Europe.”

Young people coming into the industry like the globally transferable nature of the qualification, he adds, “because it allows them the opportunity to work abroad, gain experience, make some money and then come home to their own country with that experience and put those skills to work in their own country.”

He turns to the messages being sent by Welsh members. “They want us to carry on advising government in Cardiff Bay and Westminster to increase their infrastructure spend.”

He added: “They are not alone in this. Industry wants government to find money for increased infrastructure.

“Money spent in construction has a multiplier of 2.5 to 3 times the norm. So every £1m spent in construction tends to circle out like a ripple in a pond into £2.5m into the local economy, because most building materials come locally, almost all labour comes locally and the people doing the work spend their money locally.”

This, he stresses, is all about infrastructure – spending on constructing that will be useful tomorrow to help stimulate the economy today.

“This is the biggest message we get,” he said.

All professions have to go through stages of evolution and adaptation. Today the question of energy efficiency and climate change presents RICS members with a formidable challenge.

“The majority believe in climate change and believe it’s accelerated by the effects we have on our global environment. So adaptation of our infrastructure to that climate change is a big issue, but globally the challenges are different.

“To a small country like the UK, and a smaller country like Wales, the scale of some of the challenges in large countries are just are vast. Chartered surveyors, especially those who work in construction, investment and project management creating buildings and looking after them so they remain in beneficial use, have a role everywhere whether Cardiff Bay or Shanghai.

“We need to get more efficient buildings and more built for the same amount of money. In this respect the UK and Welsh governments both had parallel programmes to get more for less, to cut inefficiency out of the system like waste in the building process.”

He explains that it wasn’t long ago that a third of the materials taken to building sites left in skips because the building industry was so inefficient about how it programmed building and used materials on site.

He said: “Our members are part of the programme to reduce that. The best factory-built units have a waste rate of 0.5%.

“Of course off-site construction doesn’t work for every type of project, so the scale of the challenge there is getting more construction for less money, whether housing or infrastructure, offices or distribution space. Why pay more than you need to?

“That’s a big challenge for the construction industry and our members are involved in this.”

Getting more for less, whether it’s road construction or rail electrification, is an issue that concerns him. He said: “I see that railway costs per mile are between 20% and 30% more than they are in Western Europe.”

More for less is, he said, a mantra which he sees not just here but in all countries he visits.

On the subject of city regions and an improved Valleys rail network, Mr Collett argues they would be precursors in attracting more investment.

“Everyone wants inward investment and Wales has a long history of attracting investment. No-one minds travelling to work if we improve transport infrastructure – and the Valleys Project would enable this – and attract spending into infrastructure early on, but if the infrastructure isn’t there it’s so much harder to attract jobs as well.”

Buying Cardiff airport is, he believes, a bold initiative. A successful airport does tend to attract industry and it’s so much easier to fly since Britain’s railways are still centred on London.

So an airport is necessary for cross-country flights and Cardiff Airport has suffered with the withdrawal of BMI.

Something had to be done and the Welsh Government did it, he adds. “What I read of their plans to attract investment and flights sounds good news, but the proof will be in the delivery as is so often the case.”

He returns to the question of confidence within the RICS and the UK in general.

He said: “The UK economy is ticking over but the flexibility in the system is limited.

“We would like to see the UK and Welsh governments demonstrate their confidence in the economy by committing more to infrastructure, making it more attractive to others to add their investment to that which government is to make.

“We are dominated by trade with the EU and one sees little confidence in most of those economies… our ability to trade with the growing economies has improved but from a low base and it’s been a two-way process.”

Of the RICS’s role he said: “We can assist governments with our knowledge of the sector and our ability to demonstrate a membership capable of delivering against politicians’ visions.

He added: “We have a quite modest degree of confidence [in the economy] and strong confidence in our members’ ability to deliver those projects government can bring forward.”

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