Public Sector Seminar

Richard Bayley

Research & Planning Director

Planning & Performance

- post CSR & Localism

• Economy & Politics

• Market dynamics

• Opportunities & Risks

• Implications for Planning & Performance

• Planning has real significance

• Performance requires more focus

• Summary

UK real GDP

annual percentage change

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Cebr OBR Budget 2011

OBR November 2011 Darling Budget 2010

Public borrowing target

revised upward

0

20

40

60

80

100

120

140

160

18020

09

2010

2011

2012

2013

2014

2015

Cebr forecast Emergency Budget 2010

March 2011 Budget OBR November 2010

Economy

• Government deficit not reducing quickly

• Big threats are inflation and energy

• Real and sustained implications for RPs

–Interest Rates

–Maintenance (& other external) Costs

–Income levels & Benefit rates

• What will Gvt response to not meeting its deficit target just before the next election?

Politics

• Medium and Long term scenarios

–More tax and public expenditure cuts?

–It does not matter as aim was to cut Gvt?

–Would or Can Labour do anything different?

• Reality is that RPs are now in a new world

–Gvt funding: little or no public funding

–Finance: corporate/mortgage lending tight

–Customers: not able to respond to demand

RSL finances

80

90

100

110

120

130

140

2007 2008 2009 2010

EBITDA interest cover

EBITDA MRI

EBITDA MRI & Sales

Real disposable incomes

-2

-1

0

1

2

3

4

5

6

2009

2010

2011

2012

2013

2014

Real disposable income Cebr

Real disposable income OBR

RPI

Opportunities & Risks

Opportunities

• New tenures

• New strategic

alliances

• New funding streams

for energy

• New investment into

the sector

Risks

• Worsening arrears

• > inflation increases

in external costs

• Less grants & local

authority services

• Tighter & more costly

debt lending

Implications for

Planning & Performance• Business Basics

–Cash management (reduce need for lending)

–Asset management (maintain profit margins)

–Customer service (co-regulatory focus)

• Silo systems

–Planning has focused on stakeholders

–Performance has been driven by regulation

–Finance has tended to have historic focus

–Risk has tended to be a text book exercise

Planning now has

real significance

• Vision/Mission

–Balance on organic v acquisition growth

• Goals/Objectives

–Emphasis on customer service & efficiency

• Project approach

–Organised around external & internal delivery

• Deliverables (incl. regulation)

–Greater linkages with plans & performance

Performance now

requires more focus

• Cash Management

–Arrears focus due to benefit changes

• Asset Management

–Profit per property focus to protect margins

• Customer Service

–Customers & Investors need to know it is good

• Performance framework

–Process, Satisfaction, Standards, VfM

Summary

• Economic & Political realities mean that the housing world has & will continue to change

• Opportunities with housing demand still strong & potential for new investment funds

• Implications of this new world are:– Longer term planning and scenario analysis

– Shorter term predictions of performance

– Asset management of whole portfolio

– Customer profiling to improve performance and asset management

Questions?

Plenary 2: Richard Neale

SAP