I’m increasingly becoming a fan of Rachel Reeves, the Labour chair of the Business, Energy & Industrial Strategy Committee, because she has an instinct for making trouble where it should be made.
The latest example was her tweeting the pay ratio of Persimmon Homes chief executive Jeff Fairburn when compared to his lowest paid employee, excluding apprentices and trainees, a couple of days before he issued his latest trading update.
You may recall that when the chair of Persimmon’s pay setting remuneration committee appeared before Ms Reeves & Co she, strangely enough, didn’t have that rather relevant piece of information to hand.
It has now been supplied to Ms Reeves, and, thanks to her twitter feed, to us too. For the record it is 3,195:1. You’ll also find on the committee’s web page the pay ratio of Mr Fairburn to the average employee, excluding his pals on the executive committee. It is 1,320:1.
That’s an awful lot of, I don’t know, bricklayers? Carpenters? Electricians? Take your pick of skilled and useful workers who perform essential tasks without which there wouldn’t be a Persimmon and there wouldn’t be the 5 per cent rise in revenues for the first half of 2018 the City’s scribblers were pouring over this morning.
There are those who would point to numbers like that, and the 3.6 per cent increase in completions to 8,072 homes, and the 1.2 per cent rise in the average selling price to £215,800 and say it’s thanks to Mr Fairburn. Including, it should be said, Mr Fairburn himself. He once infamously said he deserved the biggest bonus in British corporate history, before pressure was brought to bear and he gave a bit of it back.
On the other hand, there are even more who would point to the influence the Government’s Help to Buy scheme has had on Persimmon's buoyant results. It has kept first time buyers in the game, and handed a big advantage to those who put up new build properties like Persimmon at a time when the rest of the market has seized up (the number of people selling their existing homes is very low by historic standards).
In other words Mr Fairburn has been able to exploit some very favourable market conditions, which have contributed greatly to the company's recent success, and its latest decent enough trading update. It doesn’t hurt that Persimmon is less exposed to London and the South East, where the entire housing market is slowing, than some of its rivals.
Here’s where it gets interesting.
Persimmon currently stands at a crossroads and there is a divergence in views among analysts about where it goes from here.
Jeffries thinks it is set for a strong near term and a strong long term, even factoring in Brexit, because the Government is very keen to encourage building to alleviate Britain’s housing shortage. This, it believes, should shield the new build sector from the housing market’s current problems. It recommends holding the shares.
Shore Capital, by contrast, fears that those problems will ultimately spread to the new build market. It says sell, even with the shares having come off a lot in recent weeks.
Mr Fairburn clearly thinks he’s worth 3,195 of the firm’s lowest paid staff or 1,320 of their colleagues on the firm’s average salary. He’ll no doubt take the credit for their work, and the market’s favourable movements, if Jeffries is right.
I imagine it’ll be a different story if Shore’s analysis is on the money. If so, it might be a good time for Ms Reeves to make a little more trouble for him by hauling him in.
