Deal or no Deal?
Published: 24 May, 2012
Independents voice their opinions about the Green Deal and look at the different options which are currently available in part one of this Builders’ Merchants News/F&P Wholesale debate.
|Paul Joyner||Director||Sustainable Building Solutions|
|Tony Hogg||Managing director||GB Willbond|
|Allan Durning||Executive chairman||National Buying Group|
|Mark Earnshaw||Managing director||F&P Wholesale|
|John Gittens||Commercial director||F&P Wholesale|
|Mick Williams||Executive chairman||Williams & Co|
|David Pochin||Managing director||Robert Pochin|
|Lisa Arcangeli||Managing editor||Builders’ Merchants News|
There are a phenomenal number of drivers in the market at the moment but the one that makes a difference is that the Government is on a deadline to reduce carbon emissions by 80% against 1980 levels. The Government is therefore trying to create an environment where people enthusiastically embrace this deadline and move forward. There is a strong likelihood that the Government will mandate and regulate in order to make the Green Deal happen.
Fuel poverty currently affects over 5.5 million UK households, so to fail in this task would mean creating a bleak outcome in terms of any government’s social responsibility.
Paul Joyner: Most of the cost of fuel is the cost of investment, so we’re all paying for new power stations and off-shore generation. Everything that is currently being done, is being paid for by the consumer. But, it’s the same housing stock that will have to get us through the next 30-40 years. Energy Performance Certificates, that were part of the discontinued HiP scheme have survived and are now getting a proper lease on life.
They are being reviewed as a result of the Green Deal, so there will be a new EPC produced as part of the Green Deal activity. In terms of Building Regulations, housebuilders tend to lag behind because of the nature of pre-registration of land. The 2010 regulations are proving to be difficult, particularly for the small or medium-sized builder to understand and implement. The new Regulations have just gone to consultation and by all accounts, are a move towards much greater regulation of energy-efficiency.
The Government is very keen to support the Green Deal through a regulatory regime that makes life easier for itself and harder for builders, plumbers and the construction industry all-round. I don’t think that’s something we should be frightened of because we need to improve the quality of the buildings that we build.
At the moment we probably build the worst quality buildings in Europe. There is a move away from prescriptive building design techniques to more desired outcomes. I think we’ll see less about the individual components of the building and a more holistic approach to judging whether a building works as a whole.
A building will still have to meet the air tightness tests and it will still have to demonstrate new values in line with the original planning application and the Building Regulations themselves. While there may be a little bit of freedom in how you operate, the outputs are still going to be regulated by the Government.
There is a huge amount of time, energy, resource and expertise being expended on the Green Deal both on behalf of the Government and the industry to get into a position where as a concept and as a process, it actually works. This is not without difficulties because it is such an enormous task. I am convinced that the Coalition Government still see this as a flagship policy, and as such, the industry should really be behind it to support it and understand how to make it work to the best effect of not only the industry but, more importantly, the end-consumer.
Tony Hogg: Where do you stand on the issue of the cost of accreditation and whether it will kill the Green Deal before it even gets off the ground?
Paul Joyner: My view is that the Government is trying to keep accreditation costs down wherever possible by utilising existing systems. From what I understand of the Golden Rule, the savings will be greater or equal to the cost of the intervention. If the costs of the intervention is very high because there are lots of overheads, it becomes harder to meet the Rule. The challenge is to get the processes and systems as slick, efficient and low cost as possible so that everyone in the industry can participate and the consumer isn’t disadvantaged.
Allan Durning: At a recent CPA meeting there was comment that the launch of the Green Deal may be delayed and that it could be another 12-18 months before anything significant happens.
Paul Joyner: Don’t expect a ‘big bang’. The Green Deal is actually about a state of mind and an approach to the market. The challenge will be who’s going to step up to the mark first.
Allan Durning: During the Thatcher government when public assets were being sold off, the BT campaign ran for a period of over 12 months before the launch of share options. There was a stampede to the banks with people wanting to be part of the BT deal. I just don’t see this happening where this particular initiative is concerned.
For the German version of the Green Deal model, consumers took the subsidy and spent something like a third more on top of consequential improvements to their houses because their government spoke to them and helped them to do it correctly.
Paul Joyner: DECC has been all over the world looking at various options and the only thing the Government is doing is providing a framework for the private sector to operate within. The Green Deal provides a very broad framework with any number of participation strategies by any number of organisations – from retailers to merchants and utility companies to construction organisations – anyone can work out how best to participate in the Green Deal.
David Pochin: When things are complex, people struggle to participate. And, the finance of the Golden Rule isn’t as straightforward as it sounds.
It might work for one household but it might not work for the next. While the Deal is described as the biggest home improvement initiative since the World War II, speaking as someone who is in the supply chain, I am really struggling to understand how we are going to access it. Do we invest in assessment courses? Installers aren’t exactly breaking our doors down to find out what’s going on.
One of our roles is to educate our customers. We might find ourselves investing in that at a time when it’s speculative and perhaps training should be coming from other areas. Behind this Deal lies quite a complex, difficult-to-access initiative.
Paul Joyner: It’s a watching brief. We’re in the middle of a consultation period.
Allan Durning: Would you agree that, using that awful cliché – ‘size matters’ – that this is going to be about significant institutions and sizeable organisations? It’s not something I could imagine being managed with small pieces of work being done at merchant branch level. Is it not more likely to be about big institutions acting as providers, appointing managing agents to oversee any large block of properties or a property?
They will then have a supply chain working under them – sub-contractors. Somewhere in that process, merchants will appear, whether it’s in a framework agreement or some formalised process within the Deal.
The Green Deal won’t be about Joe Bloggs the builders’ merchant engaging with Mrs Smith of Acacia Avenue where Mrs Smith wants to spend her £12K to make her house more environmentally-friendly. It will have to be controlled and managed properly or we’ll get into the biggest mis-selling catastrophe post-pensions, where people are sold products that aren’t suitable for their properties because someone is getting commission from selling them. That’s why it needs to be institutionally driven.
Tony Hogg: You’re going to need multi-skills in one organisation. It’s no good having a plumber or a joiner; they have all got to come together. Those businesses have disappeared over the last 25 years. These days, everyone sub-contracts everything out, don’t they?
Allan Durning: The days of the ‘master builder’ that covered all those trades and skills have long gone.
Paul Joyner: The Government wants the Green Deal to be as open and universal as possible. The challenge is how you make that happen because it is much easier to bolt on the six big energy companies since they all have the core competencies to fit the needs of this particular model. Anyone else who enters the market has to create the competencies to fit the model.
David Pochin: A lot of the core competencies and qualifications we’re speaking about feed back into how people will access the finance. Delivery of the finance thorough the Golden Rule sounds good but it’s complex to get there and it involves a lot of box ticking. It becomes a bureaucratic process where the focus may not necessarily be on the quality of delivery or on the people who are making that delivery.
Paul Joyner: The finance element of the Green Deal is starting to look like the easiest bit. The complexity arises with the interaction of the entire delivery process. When I first attended meetings with DECC everyone seemed to talk about finance.
There are lots of big questions still to be answered – the biggest of which is, where’s the demand? The Government believes that if branded, trusted retailers and organisations talk about it and promote it then it will get into the psyche of the UK population.
Allan Durning: We’re talking about commercial organisations. They’re not philanthropic businesses that are here to ‘do good’ for society. By offering localised delivery points, merchants will provide a useful function. But, products like photovoltaic panels, renewable heating and boilers could come directly from the source to the site or managing agent, leaving merchants and distributors out of the loop.
Paul Joyner: Anyone considering getting involved with the Green Deal at the moment is pouring over the numbers to see what they can get.
Tony Hogg: It’s even more difficult if you are a lightside-only merchant where you only cover a small portion of the products.
David Pochin: We could face having to get involved in everything to get our little piece. People change their boiler when it breaks down. It’s almost a 48-hour process. There isn’t time for an assessor.
Lisa Arcangeli: If the Government decides it is not going to promote or advertise it, the Deal will rely on word of mouth. If we want to create the push/pull for the merchant then the consumer must be made aware of the scheme. The only way the consumer will be aware of it is if manufacturers start campaigning in support of the Deal and take on the responsibility of explaining it to the consumer, creating a route for the merchant.
Paul Joyner: I don’t think the Government is looking to do anything. It wants everyone to do something and is looking for merchants to tell installers that they have got Green Deal-ready products available.
John Gittens: From your involvement with the Government Paul, are there likely to be any initiatives around Energy Performance Certificates or stamp duty? How do you get the consumer to be switched on and get them thinking ‘there’s a benefit to me, not only now but when I sell my house’? An initiative to unlock the demand would be a good idea.
Paul Joyner: Stamp duty is on the agenda and is one of the areas being looked at. The other area is VAT. The Treasury has made £200m available as an incentive pack to go out to the marketplace and the Government is looking for suggestions on how to spend that money effectively to encourage and reward people.
The Government has tied conversations regarding the Building Regulations to the Green Deal as something that will force Green Deal activity. That is the stick, but the carrot has yet to be defined.
John Gittens: Do you know if there’s any information anywhere about the amount of money that has been promised or made available by government over recent years versus how much of that promised money actually found its way into the market during the period of a financial year?
Paul Joyner: I think it’s quite difficult because the energy companies have CEST and CERT requirements and if they don’t hit them they get fined significantly. Wherever you go – DIY sheds, etc – there is someone telling you that you can have this for next to nothing.
This has been going on for so long that consumers think it is the natural price for insulation and that it will probably be delivered for nothing. They think it might even be installed for nothing because, in order to meet the obligation, that’s what these organisations have had to do.
Tony Hogg: It’s a huge prize though, isn’t it? We have got to stop being cynical about the Green Deal because it’s in our interest at a time when construction activity is going to be on the floor. We ought to be evangelical about it and keep our private cynicisms under wraps because the Deal represents a lot of product. Somehow we have got to find some way of grasping it and making it work.
Allan Durning: It’s not a completely new stream of activity. Those boilers, radiators and insulation materials are being sold now. What we need to do is transfer it from one channel to another, so while you’re providing the boilers, radiators and additional items to the contractor, it’s going to be ‘greened up’, packaged up and sold as a Green Deal strategy. Otherwise, all of a sudden you may find your business stream is becoming rather dry.
David Pochin: When we talk of accessing the consumer, for a plumbers’ merchant, the key customer is the installer and our key relationship is with them, not with the consumer. The installer is the first port of call for the general public and if they don’t want to recommend certain technologies then they simply won’t and that could potentially kill the Green Deal if we don’t get them on-side. What people are interested in doing is investing in something that will give them a benefit that they can see in their pocket.
If their energy bills are going down then that matters more than the whole environmental issue. If you’re going to invest and spend a few hundred pounds more on improving your home, you want to know you’re going to get something back.
This article first appeared in the March edition of Builders' Merchants News.