Housing secretary Michael Gove is flexing his political muscles once again with his eyes on a new industry.
Gove wrote a letter last week to the shareholders of Kingspan (KGP), Arconic (US:ARNC) and Saint-Gobain (FR:SGO) urging them to use their “position of influence” to push the trio of companies into reaching a “just solution” to the UK housing market’s cladding problem. This comes after he squeezed housebuilders for £2bn in one-off fire safety costs – plus an additional £3bn in taxes over the coming years – to fund building fixes that could stop another Grenfell fire tragedy.
The government said the three companies had "not contributed a penny to the cost of fixing buildings in the United Kingdom that their products have made unsafe”, setting the stage for a protracted back and forth over how much they will be liable to pay.
Kingspan said it has already agreed to pay for its share of fixing issues with unsafe cladding “where we are responsible”, but the government says it has not committed to any funding despite having met with the housing department.
Figures from the housing select committee’s report on cladding remediation in 2020 outline the scale of the issue. It estimated that fixing the UK’s faulty cladding could cost up to £15bn – a figure which only includes buildings over 18 metres tall and which some experts have argued is too conservative. Having secured £5bn from the housebuilders in the face of vocal opposition, Gove has now turned his attention to materials manufacturers to make up the difference.
The companies singled out in Gove’s letter have been mentioned by name in the Grenfell Tower Inquiry – and not in flattering terms. Evidence submitted to the inquiry said Kingspan, whose K15 cladding was used on some of the tower, kept fire test results “secret” from employees and changed the tests it was performing on K15 after one test resulted in a “raging inferno”. A Kingspan technical manager’s reaction to some of these concerns at the time was that he had been “confused with someone who gives a damn”, the inquiry heard.
Kingspan told Investors’ Chronicle it had “absolute confidence in the safety of K15 when installed correctly in compliant external wall systems”. The non-London-listed Arconic and Saint-Gobin were also singled out in the inquiry for their products’ roles in the fire – though the former has defended its actions in its statements to the inquiry. Saint-Gobain said it "acknowledges that redesign and replacement of unsafe cladding systems designed and constructed in the past is a valid objective" and said it welcomed "further cooperation" with Gove.
Despite not being listed in the UK, Arconic and Saint-Gobain still depend heavily on the British market, which accounts for 10 per cent of Saint-Gobain’s €44.2bn (£39bn) revenue and 2.7 per cent of Arconic’s $8.96bn revenue. Martin Boyd, chair of leasehold rights charity Leasehold Knowledge Partnership, said this gives the British government more leverage over Saint-Gobain and Arconic than over the foreign property developers the government has struggled to extract money from.
Gove is considered by many in the industry to be much more aggressive than his predecessors when it comes to housing reform, which means much of what happens next will depend on how much time he is given in a department in which secretaries and ministers do not tend to stay long. Indeed, Gove previously held the housing secretary role as recently as last year before losing the job to a dispute with the then outgoing prime minister Boris Johnson.
"One thing is clear from Gove’s previous behaviour: he won’t be bluffing,” said Boyd, adding that the letter will likely be the first step in a long dispute – much like its negotiations with the housebuilding sector. Boyd said the trio could wind up paying similar amounts to the housebuilders and face similar planning-based threats for non-payment, such as an inability for the manufacturers’ clients to get planning permission on buildings if they use their products.
The letter could also be a sign that the government has moved on from raking housing developers over the coals on the issue. “He’s asked for as much as he can get [from the housebuilders],” said Boyd, suggesting that other industries “from architects down” could be in the firing line next.
“If you look at Dame Judith Hackitt’s report [on the Grenfell fire], it was every part of the construction industry system that failed,” he said.
Arconic did not respond to a request for comment.
