Thursday 13 December 2018

Abbey chief: Brexit 'act of self harm' will hit Ireland hard as well as UK

Not for turning: Theresa May, UK prime minister, gestures as she delivers her keynote speech during the recent Conservative Party annual conference where she extolled the virtues of Brexit. Photo: Bloomberg
Not for turning: Theresa May, UK prime minister, gestures as she delivers her keynote speech during the recent Conservative Party annual conference where she extolled the virtues of Brexit. Photo: Bloomberg
John Mulligan

John Mulligan

Brexit is a "national act of self-harm" that will be potentially very damaging to Ireland, according to Charles Gallagher, the executive chairman of stock market-listed homebuilder Abbey.

"I'll be very honest with you, I'm distressed about Brexit," said Mr Gallagher. "I spoke on public platforms in favour of the UK remaining in the European Union."

Mr Gallagher, who lives in a well-to-do London commuter town, unsuccessfully stood as a Conservative candidate in a Labour stronghold in Yorkshire in a 1987 general election. He said he voted Conservative in the last election and will again in the next, but remains a staunch remainer.

"I still at this very last moment, I light candles and I pray that there might be a change of heart on this subject," he said.

"I see very little good coming out of it. In theory, you can write lots of scripts about how things could be good or bad, but I personally feel it's a national act of self-harm.

"I don't think it's just going to be damaging to the UK. I think it's going to be damaging to all of Europe and, potentially, particularly damaging to Ireland."

Abbey, the smallest of three homebuilders listed on the Irish stock exchange, sold 75 homes in Ireland last year and 524 in the UK. It has a land bank in Ireland that could potentially deliver up to 700 units.

Mr Gallagher and his wider family own just over 80pc of Abbey, with another 10pc owned by institutional investor FMR. The company has a market capitalisation of about €315m.

Abbey is actively hunting for sites in Ireland in order to rebalance its operations. Historically, Ireland typically accounted for about 40pc of its home sales.

"I don't see much good over a two-, five- or 10-year period," said Mr Gallagher, who added that the UK will become isolated as a result of its exit from the EU.

He said he "could perhaps be persuaded" by a Brexit argument that the UK will become the Singapore of Europe.

"I rather think it's more likely to be Cuba," he said. The executive chairman also said he would support a second referendum. "I would like the House of Commons to just overturn the whole thing," he said.

Mr Gallagher said that Abbey has been enjoying very high margins in the UK over the past number of years, boosted by the help to buy scheme there.

"The reality is that margins are inevitably going to normalise," he said. "Broadly speaking, you've a low-inflation environment, and margins are beginning to normalise. The danger is that as that process progresses, it also combines with other difficulties in the economy, and if that happens, well then it could be that they go lower still.

"Clearly there's some fear of that in the market because the shares of builders have been on a downward track for months."

Persimmon, Barratt and Taylor Wimpey are the UK's three biggest homebuilders.

"The business is very, very volatile, and in spite of everybody's best efforts has been up and down like a yo-yo for all my career and going back forever," said Mr Gallagher. "The truth is that spec housebuilders have had a good run in England. We all hope for the soft landing, but the soft landing is a bit like the Phoenix - often talked about, but never seen."

Last week, Mr Gallagher called for the Vat rate on new houses in Ireland to be slashed to zero from 13.5pc. He claimed that while such a move would probably boost builders' profitability, it would also spur homebuilding.

Indo Business

Business Newsletter

Read the leading stories from the world of Business.

Also in Business