The government officially regards it as “disappointing” that Hitachi has pulled out of building a nuclear plant at Wylfa. Why? Well, the loss of potential jobs in north Wales must be acknowledged. But, from the point of view of meeting the nation’s energy needs, there is no reason to be disappointed.
Hitachi had been wobbly on Wylfa for the past two years anyway, despite being offered generous-looking terms. More to the point, the government’s experts – the National Infrastructure Commission – are not banging the drum for new fleets of giant nuclear power stations.
The NIC reiterated its two-year-old advice only last month: “The government should take a one-by-one approach to nuclear and not agree to more than one new nuclear plant, in addition to Hinkley Point C, before 2025.”
It’s not the NIC’s job to pick which plant to build, but almost everybody believes the next cab on the rank, as it were, is the intended Hinkley replica at Sizewell C in Suffolk. Wylfa wasn’t a priority.
What is? Again, read the NIC’s latest report, which put the case for a more rapid rollout of renewables, meaning on-shore and off-shore wind and solar, on grounds of cost and meeting emissions targets. Instead of an increase in renewables from 40% to 50% by 2030, which was the view in 2018, the electricity system could reach 65% with “no material cost impact”, it said.
In short, renewables “are now the cheapest form of electricity generation due to dramatic cost reductions in recent years”. As for the overall security of the system, the NIC repeated its point that interconnectors will have a key role to play in balancing supply and demand.
Seen in this context, Hitachi’s formal exit is no great loss. In fact, one could cheer the clarity. It should make it marginally easier for ministers to concentrate on their own adviser’s energy analysis.
Housebuilders lay on their pitches to Sunak with a trowel
There must be a rule that requires chairmen of large housebuilders to plead for more subsidies when announcing financial results.
John Allan at Barratt Developments was at it earlier this month, urging the government to “consider what further options are available to help potential first-time buyers” now that lenders are culling high loan-to-value mortgages.
Now here comes Redrow’s John Tutte. There should be “long-term reform” of stamp duty “to free up more cash for deposits”, he says, fretting about “a hiatus in the market” next March when the current sub-£500,000 stamp duty holiday comes to an end, just as restrictions on help to buy are due to kick in.
These corporate pitches would be more persuasive if the subsidies weren’t so obviously sticking to the builders. George Osborne’s help-to-buy bonanza made the big firms fabulously rich and Rishi Sunak’s stamp duty holiday has rescued returns for them in the year of the virus.
Redrow’s pre-tax profits fell by two-thirds to £140m in the year to June, but operating profit margins still arrived at 11%, which ain’t so terrible. If Tutte’s comments about a “record order book” are a guide, normal service may soon be restored in the form of 20%-ish margins – a splendid ratio but not untypical in a comfortable sector.
The most obvious ways to help first-time buyers, then, would be to allow house prices to drift lower and to force builders to cut the prices of new-build properties, which is what would happen in a competitive market.
There may be indeed be a hiatus next spring, but the danger in the other direction is that government finds it impossible ever to kick the subsidy habit. Sunak should resist the pressure to keep playing. In practice, one suspects he’ll cave in: the housebuilding lobby is a phenomenon and is currently laying on its message with a trowel.
Hut Group valuation is hard to square with its meagre profits
The Hut Group’s governance is shocking. Its founder, Matt Moulding, is both chairman and chief executive, has a veto on takeovers for three years, could earn in £700m in freebie shares for reasons nobody has explained satisfactorily, and is also landlord to a few of the company’s properties.
None of these features deterred new investors. Shares in the online health, beauty and nutrition retailer popped by 25% on the first day of trading on Wednesday. At its new valuation, Hut is worth £6.75bn, a valuation that is hard to square with the modest profits. The ride will be entertaining. But buyers be warned: governance doesn’t matter until it absolutely does.