Land of the giants – an exclusive interview with Steve Morgan and Tony Pidgley

Posted 3 July 2015 by Rupert Bates

Steve Morgan and Tony Pidgley set up their businesses in the 1970s and are two of the biggest and most successful figures in housebuilding - and good friends too. Rupert Bates, editorial director of Whathouse.com, talks to these legends of the industry...

 

“How many have you had called in?”

“Don’t get me started on reserved matters.”

“They say we must build more homes, then slam on the brakes.”

“One council is even refusing to register our application and their chief executive won’t return our calls.”

It could be any old housebuilders moaning about planning over a pint in the pub. But these two are not ‘any old housebuilders’; they are arguably the two most influential in the industry.

Tony Pidgley and Steve MorganMeet Steve Morgan, the chairman and founder of Redrow, and Tony Pidgley, the chairman and founder of Berkeley. You may have heard of them.

I hesitate on which order to name the pair for fear of suggesting a hierarchy; not that they would give a damn, as their mutual respect for each other is huge. In the end I went for alphabetical.

The compliments rained down all night, but every one was backed up and justified. No idle flattery here over a glass of Burgundy. Their entire careers have been characterised by saying what they think. Morgan and Pidgley don’t do spin.

I did ask who would win in a fight and they each pointed to the other.

It would make a hell of a scrap, but would be nothing compared to the make-up dinner and laughter they would have after.

“Steve is the best scrapper I’ve ever seen [I assumed in the business sense]. But to be fair you wouldn’t want to be against either of us,” said Pidgley.

Four hours in their company in The Rib Room restaurant of London’s Carlton Tower hotel was as instructive and enthralling as it was eye opening and entertaining.

Both men are brutally honest on all matters, but with shareholders to consider and recognising that their words carry enormous weight in the industry and beyond, they were the souls, or rather cod off the bone, of discretion – up to a point.

“We tell it as it is, not just because of our positions and experience, but because we have utter belief in what we do as housebuilders,” said Morgan.

And if you are waiting for the big announcement, they are still arguing about whether the merged business should be called Berkrow or Redley. Just kidding City, just kidding.

I have been fortunate to meet fascinating characters from all corners of housebuilding and have interviewed Pidgley and Morgan separately on many occasions.

But this was something else; the two biggest names side-by-side, far closer friends than I realised whose families often holiday together, happy to chew the fat and take time out of schedules that Hercules would baulk at - yet alone two men in their 60s.

Tony Pidgley“So what do you want to talk to us veterans about?” asked Pidgley. Veterans; I’d rather call you legends.

Silence, a quick glance at each other and a chuckle. Modesty forbade, but they weren’t going to argue with that.

I was a spectator to start with as they traded current planning stories and a reminder that no matter the so-called reforms, the system, especially when it comes to appeals, still needs an awful lot of work.

“Actually let’s not talk planning,” said Pidgley. “We don’t want to come across as moaning builders.”

“And let’s face it, we’re both doing alright,” said Morgan.

So when did they first meet?

“You came to talk to me when you were looking to float,” said Pidgley.

“We’ve always bounced ideas off each other. It has been a very open relationship, built on trust, respect and friendship and we have each learnt a lot from one another,” said Morgan.

“I have so much respect for Steve, starting Redrow from nothing, leaving it, going back to save it and turning it into what it is today,” said Pidgley.

“Tony is king of London. He knows his patch and has done so much for the capital. Nothing moves in London without him knowing.

I can’t remember him ever coming second,” said Morgan.

“We’ll never catch Berkeley in London. Tony introduced a professionalism to the London building market that we’d never seen before. Berkeley has changed the skyline of London and changed the thinking of planning and housing in the most important city in the world.”

Berkeley sustains around 12,000 jobs in London and the south-east and has built 10% of new housing and 10% of all affordable housing in London over the last five years.

They are both fierce competitors who love to win almost as much as they hate to lose. But until Redrow moved into London they were fishing in different ponds and still largely do. Any truth in the ‘Redrow tanks on Berkeley’s lawn’ quote?

“When Redrow decided to open a London office, I rang Tony and said we are going to park a tank on your lawn, but that it was only a Dinky toy, not a Panzer division!”

“We perhaps potentially overlap on about 20% of our business with the occasional head to head, but we’ve never had a cross word,” said Morgan.

London talk prompts Pidgley, who enjoys the friendship and shared vision for the capital of the London mayor, to mess up his hair and untuck his shirt in an imitation of Boris Johnson, even if the accent was more estuary than Eton.

“Don’t underestimate Boris. He is very talented, intelligent and driven, and doing great things for London,” said Pidgley.

Shared ideas work best when there are shared values. Talking to incredibly successful people, you are desperate to discover what makes them tick and what motivates them to keep getting up in the morning and going to work.

They have made personal fortunes, created many thousands of homes and jobs for others and their business legacies are assured.

It is a question they never properly answer because they can’t relate to it. For a moment, there is silence and a mouthful of cod.

It is natural; it is common sense; it’s in their blood. Why wouldn’t you want to continue to work hard and make a difference?

“I was up and out the door at 5.30 this morning,” said Pidgley.

“I was in the gym at 6.15,” said Morgan, making a mental note to make it 5am next time. I told you they were competitive.

“What time did you get up Rupert?” No comment.

“When will you stop work Tony?” I asked.

“When I die.”

They both built their businesses from nothing and agree that a tough upbringing lit a flame, firing the value of working hard to achieve anything.

Would they have been so driven and successful had they been born with silver spoons in their mouths?

“No,” they both reply instantly, while pointing out that it was wrong to equate tough upbringings with unhappy childhoods, with both growing up happy, but with a young zeal to succeed and values learnt early.

“I probably knew more about business aged 15. I also learnt as a kid that men fought on Sundays,” said Pidgley, whose Barnardo’s and gypsy backstory has been written to death.

Steve Morgan“We don’t work for the money any more. We love what we do,” said Morgan. Both refer to their businesses as ‘she’ – not just a person, but a woman to love.

Now while their work ethic remains undimmed by success and their drive relentless, these men know how to play hard too and enjoy the fruits of their endeavours and the finer things in life with a great generosity to others.

They are builders from their boots to their hard hats. They will tell you building a good product is not rocket science. They both highlighted their attention to detail, which, having toured sites with both of them, is a vast understatement.

Either of them walking up the path to a show home or emerging from a lift has caused many a site manager and sales negotiator to cross themselves and that’s just the fear of getting Morgan’s tea wrong.

There is nothing they miss: they can spot a wrong-sized architrave from 100 paces, read a floor plan with their eyes shut, pick up most tools on-site and do the job.

In fact, for all the corporate baggage they have to deal with as leaders of flourishing plcs, it is on-site that they are perhaps happiest.

If the pair decided to set up as lawyers, they’d probably call themselves Spec and Snag. To them if something is out by 10mm it may as well be a mile. If they call for the tape measure you’re in trouble.

“I had my two young daughters on my own the other weekend. I took them round a few sites. They loved it,” said Pidgley. We’ll take his word for it, although the ice creams at the end might have helped.

Customer care is clearly high on their agendas too. This is something that has dramatically improved in housebuilding over the last 20 years, but Pidgley and Morgan have always been able to put themselves in customers’ shoes, to look at a problem from both a trade and consumer perspective.

“To be a true professional and successful in this business you have to have an eye for detail, but also an absolute passion for what you do and we both have that,” said Morgan.

While happy to talk about themselves, they are very keen, lest people think they hold too much influence over their businesses, to stress that both companies are very well placed when they finally hang up their high-vis jackets – sometime after the Nimby becomes extinct.

 “Rob Perrins [Berkeley Group managing director] runs the business day to day. I’m more of an ambassador now and loving it, but still keeping my hand in snagging an apartment or buying a bit of land.”

Morgan has the highly experienced John Tutte as chief executive and both Morgan and Pidgley are clearly very comfortable with who will end up holding their babies. They are also immensely proud of the range and quality of non-executive directors they have on board.

Both are praised for their instincts, but Pidgley, the man who historically calls the market better than anyone points out that buying land at the right price is simple maths.

“Why do people say we rely on gut instinct? It is largely common sense. A key question is when do you take a housebuilder liquid?’ said Pidgley,

So who makes a better builder – an accountant or an entrepreneur?

“An entrepreneur all day long,” said Morgan. “When the industry is riding high, people think anyone can do it. You have to know how to ride the cycles, although we need to take out the booms and busts. Take out the ingredients for booms with sensible lending and government policy and you won’t get the busts.”

Pidgley says he is seeing a lot of new developers coming into London who he has never seen before, not to mention digesting the news that Mike Ashley, of Sports Direct and Newcastle United, has invested heavily into a Chelsea residential scheme – a sign perhaps that the top of the market in the capital has been reached? Cue enigmatic smile from the master of timing.

Avoid booms and busts and you will recruit new talent, encouraging school-leavers and apprentices to pursue the myriad and well-paid industry opportunities, making for attractive long-term careers.

That is also where place-making and big urban regeneration schemes help, said Pidgley, with new communities such as Berkeley’s Kidbrooke Village in Greenwich able to offer a 20-year path for local employment, rather than training someone up to work on a smaller development for just 18 months and then with no site to move on to locally for more work.

Tony Pidgley, rupert Bates and Steve MorganRedrow and Berkeley are at the forefront of training in an effort to address the chronic skills shortages. While planning issues and delays choke off housing supply, both Morgan and Pidgley agreed there was a fundamental lack of understanding of a housebuilder’s business model.

“Take the accusation we land bank. Ludicrous. We can’t afford to, especially with shareholders wanting 20% return on capital and land inflation 1% to 2% a year. Carrying costs hits product and the bottom line. Politicians don’t get it,” said Morgan.

It was impossible to steer clear of planning all night. With community consultations, listening to local views, taking them on board, amending applications accordingly, adhering to local planning policies and agreeing to contributions, then if permission is granted, that should be it.

“The council decision should stand if we have jumped through every hoop required. Why should it then either go to appeal or be held up for 18 months on the detail?” said Pidgley.

Both agree that, generically, the industry has not promoted itself particularly well and should push itself forward more as a force for good.

“We create homes and jobs, both directly and indirectly and there are hardly any imports, with 90% of the supply chain UK products and services,” said Morgan.

“We must pull together to promote the industry and it is up to us to train tomorrow’s workforce,” said Pidgley.

Vision and order are sound mantras to build by – the vision to see an opportunity and the order to control costs and scale projects and products.

“We have around 24 house types, while Berkeley’s product is more bespoke. But we both believe in the KISS [Keep It Simple Stupid] principle,” said Morgan.

So where are the Pidgleys and Morgans of tomorrow? Can a young owner-driver starting from nothing get on the housebuilding grid and develop in volume? After all, the country needs them.

“There are a lot of barriers to entry, be it finance or planning. It is certainly harder to get started these days,” said Morgan. “But we must encourage the next generation and there needs to be more support for smaller builders.”

Politicians talk of striving for at least 200,000 new homes a year – figures that many dismiss as unachievable, however strong the market.

“I think we could get there in six or seven years. We need to address the skills shortages, but quarries and brick works that closed down are getting back up and running,” said Morgan.

“There may be a limit to the number any company can build, but the top three by volume are building more than ever.”

As the truffles are served, I tiptoe into the minefield that is the R word and get blown up in the first stride.

“Retire? It doesn’t enter my head.

I have had an amazing life with no regrets. I look at some of my schoolmates who went on to run successful businesses. They sold out and are now dead,” said Pidgley.

“I don’t look back. It can be destructive,” said Morgan. “If you pushed me, I would say in hindsight I wouldn’t have come out of Redrow when I did. But do I regret it? No.”

In 2009, having left in 2000, Morgan returned to Redrow to find a trading loss of £44.2m on revenue of just over £300m. Results forecasts for the year to the end of June 2015 is turnover of £1.15bn, with nearly 4,000 legal completions and £195m pre-tax profit.

“You’ve never really been out of Redrow. You are Redrow,” said Pidgley.

The thrill of the hunt, the chase for a land deal, is as strong as ever in both men.

“We are lucky to be in an industry that creates a legacy and positively affects so many lives.”

Outside of building homes and places The Morgan Foundation and The Berkeley Foundation raise millions for charity and the work is clearly very close to both men’s hearts.

“Our businesses will live on long after us, but we have got the structure and the succession right,” said Pidgley, with the Berkeley Group’s preliminary results for the year ending April 2015 showing revenue of £2.12bn and pre-tax profits of £539.7m with the sale of 3,355 new homes.

While planning in a housing sense might try their patience, business planning is unconditional.

“Fix the budget,” said Pidgley.

“Fix the budget,” echoed Morgan. “You don’t have forecasts, you have budgets. You can exceed it or miss it, but the budget remains and is the measure of your performance and what you are accountable for.”

The words honesty and integrity, dealing in handshakes, pepper the conversation.

“At the dinner table one of you cuts and the other one chooses. That keeps you honest,” said Morgan, although that didn’t apply to his distribution of the curly kale in The Rib Room.

They are desperate to share the credit with staff, past and present, for they believe passionately in the team ethos, but in virtual unison say: “We are the culture and conscience of our businesses.”

It seems after four hours round the table they really are merging. Just kidding, although it would be some business.

 

This article first appeared in Show House magazine, the leading trade title for the UK housebuilding industry and the sister publication of WhatHouse?

Pictures: Tina Chatfield Photography

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