The Observer
Business 09.01.22 51‘There is
a sense
that
people
who have
battled
through
the
pandemic
want and
need a
real-
terms
pay rise’
Kate Bell,
TUCRIGHT
A worker at
Amazon, which
gained publicity
by raising pay
above minimum
levels last year.
LEFT
Jack Saunders
of the UCU:
‘Management
adopts a macho
stance.’ Sophia
Evans/ObserverBELOW
Sharon Graham
has been credited
with focusing
the Unite union
tightly on pay.Taylor Wimpey
tries to put its
house in order
Firm is just the latest to
fi nd itself under attack
by US activist investor,
writes Julia Kollewethousands of companies will consider
how much to pay staff from April
and whether that means an infla-
tion-busting, real-terms rise head-
ing towards double fi gures.
With the main measure of infl a-
tion, the consumer prices index (CPI)
at 5.1% and heading towards 6% , offi -
cials at the Bank have scoured pri-
vate sector pay settlement data to
detect whether a wage/price spiral –
one that entrenches rocketing levels
of infl ation for years to come – has
gained momentum and whether they
need to impose further rate rises in
2022 to calm the situation down.
Mulkearn, director of Incomes Data
Research , of is one of the experts con-
sulted by the B ank. His fi rm found the
median pay award across the econ-
omy was 2.3% in the three months
to November – with little sign of
a wage spiral. Rival consultancy
XpertHR says much the same. Its
median basic pay monitor found
increases averaged 2.2% in the
same period, up from 2% in
October.
The offi cial data, which also
takes into account increases in
pay when staff are promoted or
change jobs, jumped in the fi rst
months of the pandemic, mostly
in response to large job losses among
lower-paid workers artifi cially raising
the average.
A spike above 8% began to fade in
the summer. In the latest fi gures, for
October, the average increase in pay
had tumbled below 4% and looked to
be falling further in November.
Mulkearn believes a wave of dis-
putes and strike ballots means iso-
lated settlements above inflation
could become more common.
Not that there is the prospect of a
general strike or even the kind of mass
industrial strife that characterised
the 1970s, when union membership
peaked at 12 million. Steph en Bevan,
head of research at the Institute for
Employment Studies , said there was
little evidence so far that either the
6.7 million unionised workers (4 mil-
lion of them in the public sector), or
the 76.3% who are not members, were
buckling up for a fi ght over pay, other
than at the margins. Union member-
ship among private sector companies
stands at one of the lowest levels on
record, at 2.56 million in 2020.
Bevan said that while fi rms such
as Amazon and Starbucks had gained
publicity for pushing salaries above
legal minimums, they were unlikely
to permit year-on-year real-terms
increases. “The reality is that these
are US companies and when you look
at how they operate, in the US they
are paying consultancies to make sure
unions cannot even gain a foothold .”
Nevertheless, a skills shortage,
especially in manufacturing , but also
in professional sectors such as law,
accountancy and computer services,
is working in favour of staff.
About 1,200 Tesco warehouse staff
and HGV drivers recently rejected a
4% pay offer, threatening Christmas
deliveries, before settling on 5.5%,
backdated to July, plus a further 0.5%
in February. The Usdaw union set-
tled with Tesco for what is thought
to be a similar amount, on
behalf of 5,000 members. In
November, Ford agreed a
two-year deal that kicks off
with a 5.1% rise before peg-
ging pay to the retail prices
index (RPI) in the second
year. RPI is currently at 7.1%.
Sharon Graham, the new
leader of Unite, is credited
with orchestrating a more-
focused campaign by the union
to match pay to infl ation, and exert
pressure resulting from high levels
of vacancies and changing work pat-
terns to redress a decade of low pay.
Kate Bell, head of rights at the TUC,
sa id there was anecdotal evidence
that workers were fl exing their mus-
cles after pushing average wage rises
to around 4% pre-Covid. “Lots of peo-
ple have been working hard through
the pandemic and understandably
want to get back to pay rises at that
level,” she sa id. “There is a broader
sense that people who have battled
through the pandemic want and need
a real-terms rise.”
So far, only the RMT union, which
represents rail workers , looks like
securing an above-infl ation rise if RPI
is used as the benchmark for deals.
It already has a commitment that
Transport for London will increase
tube drivers’ salaries by RPI plus 0.1%
from April. Agreed as part of a three-
year deal, it looks prescient now.
As a negotiator, the RMT stands
out. No other can match its resolve- or its ability to bring the railways
to a halt. That may mean the Bank
of England is worrying unnecessar-
ily about wages taking off – at least
not with the ferocity seen in the 1970s,
when union membership was strong
and wage bargaining to beat infl ation
was the norm.
R
ecord house prices,
cheap mortgage s,
a stamp duty hol-
iday and the “race
for space” during
the pandemic have
meant huge rewards for UK house-
builders, Taylor Wimpey included.
In the fi rst half of 2021, the UK’s
third-largest housebuilder fi nished
a record number of homes, returned
to profi t, and upgraded forecasts for
the full year, the results for which it
will publish in March.
But the company has become the
latest target of unwanted atten-
tion from US activist investor Elliott
Advisors, which has also picked
battles with the Argentin ian gov-
ernment, mining giant BHP and
Britain’s second-biggest drugmaker,
GSK, among others.
A month ago, the New York hedge
fund went public with its demands
on Taylor Wimpey, revealing in a
nine-page public letter to Taylor
Wimpey chair Irene Dorner that it
was one of the company’s top fi ve
investors and wanted the house-
builder to fi nd a new chief executive
from outside the organisation.
In typical fashion, Elliott was
scathing about Taylor Wimpey’s
current leadership’s “operational
and strategic missteps,” and called
for an experienced external candi-
date to succeed Pete Redfern as chief
executive. The letter came a few days
after Redfern announced he would
be stepping down in 2022 after 15
years at the helm (he denied that
the decision was prompted by pres-
sure from Elliott). In 2006, Redfern
became the youngest FTSE 100
chief executive when, at 37, he took
charge of George Wimpey and led a
merger with rival Taylor Woodrow
the following year.
Taylor Wimpey says it is at an
advanced stage in its search for a
replacements, looking at internal
and external candidates , including
from outside the housebuilding sec-
tor. Elliott is pushing for it to choose
someone from within the indus-
try and is thought to prefer either
Crest Nicholson chief Peter Truscott ,
who previously ran Galliford Try
and also spent 30 years at Taylor
Wimpey; former Persimmon boss
Dave Jenkinson , who quit last year
in a row over build quality (and after
a controversial £45m payout ); and
Barratt deputy chief executive and
chief operating offi cer Steven Boyes.
Analysts say Truscott is the most
likely to get the job.
From within Taylor Wimpey ,
another strong candidate is group
operat ions director Jennie Daly, whohas long been talked about as a pos-
sible successor to Redfern.
“She has lots of experience in
strategic land [buying] and plan-
ning, which is the lifeblood of
housebuilding,” said Anthony
Codling, chief executive of property
fi rm Twindig. “She’d also bring a
great deal of operational expertise. ”
If appointed, Daly would be the
only female chief executive of a
major housebuilder; Dorner is the
only female chair in a male-dom-
inated industry. There was spec-
ulation , swiftly denied, that Jeff
Fairburn, the Persimmon boss
ousted after a public outcry over his
proposed £110m bonus , was also
being lined up for the job.
Analysts said Elliott was attracted
to Taylor Wimpey because of
Britain’s housing shortage and the
fi rm’s hidden potential, including
its land bank, but some believed it
needed to improve its operational
performance. Its shares have fallen
by a quarter since February 2020.
Clyde Lewis of Peel Hunt said:
“Elliott has some valid points. Of the
major housebuilders, TW has proba-
bly been the quietest in the past fewyears. Persimmon has gone through
a lot of management change; Barratt
has made more progress in terms
of strategy and margins. TW hasn’t
evolved much. There’s probably a
modest amount of support [behind
Elliott] from other investors.”
In its criticism of Taylor Wimpey,
Elliott cited its “failed large-sites
strategy”, which it said had led to
cost overruns and sale-price erosion
in 2019, as well as the £500m fund-
raising and £1.7bn splurge on new
land in summer 2020. It noted that
the fi rm had suffered the sector’s
biggest decline in housebuilding
volumes in 2020 , with a 39% drop
compared with Barratt at 29% and
Persimmon at 14%.
The company has defended its
record, noting that it was the fi rst
major builder to shut all its sites
when the pandemic fi rst hit. The
housebuilder has pointed to its
record fi rst-half profi ts for 2021
and its upgraded forecasts for the
full year. It also said that the equity
increase enabled it to snap up land
at low prices, investing for the future
in the hope of reaping stronger
growth in 2023.
Despite all that, Elliott looks to be
shaping up for its next fi ght.Taylor Wimpey beat records in 2021.