Unfair dismissal? A wishy-washy, outdated, illogical concept. The boss of Abbey, one of Britain’s leading housebuilders, believes that employment tribunals should be abolished and staff should be hired and fired at will.
Charles Gallagher, scion of an Irish building dynasty, is an unlikely warrior on a self-declared battle to shake up Britain’s “stagnant, fixed” labour system. He complains that it is far too difficult to dismiss employees. “If you are the manager of the England football team, nobody would suggest somebody else should pick your players.”
Mr Gallagher’s company generated revenue of €97 million (£87.5 million), selling 535 new homes in Britain, Ireland and the Czech Republic last year, largely at the lower end of the market — average prices were around €162,000. Its properties can be found across the South of England and the Midlands — in Essex, Kent, Cambridgeshire and Northamptonshire.
The company, which has a relatively low profile, has avoided the headlines apart from a spat in 2003 when it vigorously objected to Abbey National bank shortening its name to Abbey — a “high-handed and unethical” move, the housebuilder complained.
Mr Gallagher, though, is staking a claim to be one of Britain’s most controversial bosses with an abrupt assault on employment legislation. At The Times CEO Summit last month he declared that the single most important step to reviving Britain’s economy would be the abolition of employment tribunals. “A job should not be a protected tenancy,” he said.
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A slim, cerebral, fair-haired figure sitting in Abbey’s nondescript office in the Hertfordshire town of Potters Bar, Mr Gallagher, 51, delivers a passionate tirade against “dysfunctional” laws intended to protect workers: “What do we think companies are for? A company is there to make products, serve customer needs and generate employment, generate wealth for the country.
“I’m involved in a number of small and medium-sized companies and the issue of employment is something of a vexed question.”
Britain’s employment tribunal service received 218,100 claims in the year to March — more than 4,000 per week. Vince Cable, the Business Secretary, is consulting on plans to toughen the criteria for challenges by barring workers from challenging dismissal unless they have been in a job for two years.
Mr Gallagher wants to go further. He complains that the existence of tribunals is a “strong disincentive” towards taking on staff, at a time when youth unemployment is approaching the one million mark. Even when successful the awards from such tribunals are relatively paltry — a median of £4,900 in compensation which, the Abbey boss argues, makes the heat and rancour barely worth the time.
Mr Gallagher believes that discrimination — on racial or gender grounds — should be prohibited so that, for example, companies could not simply dismiss women who become pregnant. This, he says, could be dealt with through conventional courts. “If you remove the employment tribunal, you remove the concept of — in inverted commas — unfair dismissal,” he says, suggesting that those who are bullied, forced to work longer hours or have responsibilities eroded should simply get another job.
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“If you get yourself a job and you’re unhappy, miserable, the obvious response probably would be to forget it, change it,” he says.
Abbey employs 250 people on a full-time basis but has many more builders and bricklayers working on its building sites through subcontractors. The company dates back to the 1950s when it was founded by Mr Gallagher’s father, also Charles. After thwarting a hostile takeover bid in the 1980s from Kier, the French housebuilder, the older Mr Gallagher died in 1993. The family’s wealth is estimated at £85 million on the Sunday Times Rich List.
The Abbey boss has a track record in strong political views. He is gloomy on the prospects for Britain’s tepid housing market, blaming banks for a lack of mortgage finance to first-time buyers. The number of properties built annually in Britain, he says, was once as high as 300,000 but has fallen to 110,000.
“It’s been a difficult time since the Northern Rock disaster — a year later, we had Lehman Brothers. The mortgage market has changed completely and it’s become very difficult for people to come up with deposits,” he says.
The type of low-cost flats in Abbey’s developments have fallen in price by about 30 per cent since the economic downturn began, slipping to around £80,000 in the South East. Mr Gallagher believes that this will not fall further but he feels that more upmarket houses, which have recovered from their low point, could still drop by 15 to 20 per cent over three years.
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“In southern England in particular, the market is fundamentally tight. You could argue there are housing shortages,” says Mr Gallagher. “But if the mortgage market stays in the current form it’s in, and if fiscal conditions stay the way they are, prices will gradually slip.”
The Abbey boss would like radical reform of Britain’s banks — he favours a complete separation between high street and investment banks, going further than the firebreaks pushed by Sir John Vickers’ independent banking commission. The ideal, he suggests, would be a return to old-style building societies that had a lifelong relationship with customers and their savings. “You need to match long-term finance with long-term lending, as building societies once did.”
Mr Gallagher is proud of his company’s role in providing affordable homes. Some, though, might find it difficult to accept his hobby horse in abolishing recourse for unfair dismissal — particularly given that he comes from a wealthy family. He received a pay package of £660,000 last year and, contrary to corporate governance guidelines, is on a two-year rolling contract — entitling him to a payout of two years’ salary if he were to be dismissed.
“It’s outside the guidance we’ve had for a long time so I’m a beneficiary, to some extent, from the current arrangements,” he admits, adding that he would change his own contract to the recommended maximum of one year “if they made it the law”.
Analysis: family suffers a rocky ride
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The recession has been particularly tough for Abbey, which has suffered from having a significant chunk of its residential construction operation in crisis-stricken Ireland.
The housebuilding group sold homes valued at more than €200 million (£180 million) at its high-water mark in 2006. That figure slumped to €97 million last year, although the company has used plunging property prices as an opportunity to swell its land bank for future development.
Abbey’s shares lost two thirds of their value in 2007 and 2008 when the economic crisis was at full tilt. They have since gradually recovered from their low point but, at 449p, they remain 40 per cent below their pre-crisis peak.
That has taken its toll on the Gallagher family’s wealth, which has slumped from £230 million in 2007 to £85 million today, according to the Sunday Times Rich List.
Analysts say that the group has fared relatively robustly in the circumstances, given the sharp squeeze in mortgage credit that has badly hit Abbey’s customer base of first-time buyers of houses and flats in the South of England.
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There have been murmurings about the contrasting fortunes of the family firms, though. A private company, Matthew Homes, which is also controlled by the Gallagher family, has fared markedly better than Abbey. It managed to remain in the black throughout the nation’s economic slump — a fact unlikely to thrill Abbey investors.
CV
Age:
51, born in Hertfordshire
Education:
Harrow School; studied engineering at Jesus College, Cambridge; MBA from London Business School
Career:
1977 industrial scholarship, GKN
1981 joined the private family business Matthew Homes as a trainee
1986 became a non-executive director of Abbey
1991 chief executive, Abbey
1993 executive chairman, Abbey
Family:
Married with three daughters and two sons
Q&A:
Who is your mentor?
My father
Does money motivate you?
I’m motivated by harmony — at work and at home
What was the most important event in your working life?
Fighting off a hostile takeover bid from Kier in 1985
Which person do you most admire?
Baroness Thatcher
What gadget must you have?
An Apple iPad 2
What does leadership mean to you?
Acting by example
How do you relax?
With my family and by playing chess