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鈥淣o comment,鈥� says Nigel Wilson, with a broad chuckle and a wry grin which indicates that my question has hit a mark. I have just asked the long-time chief executive of insurance giant L&G if he was pleased that he turned down the ministerial job he was, by all accounts, offered by Liz Truss in September.

Despite his silence, one cannot but help feeling that the decision to refuse Truss鈥檚 offer reflects well on his judgment 鈥� and I suspect he knows this.

Either way, if the media-friendly Wilson 鈥� Sir Nigel, to give him his full title 鈥� is uncharacteristically unwilling to discuss his decision, it is certainly little surprise that he is being sought after at the highest levels. Since taking the L&G top job in 2012, Wilson has impressed both the City 鈥� through consistent financial performance 鈥� and policymakers with his vision of 鈥渋nclusive capitalism鈥�, his claim of putting social purpose at the heart of his multi-billion pound business.

His strategy to deliver this vision has been, on one level, simple: to take the billions in pension liabilities that L&G looks after (actually a staggering 拢1.3 trillion at the latest count) and, rather than engage in complex financial engineering, look instead for real physical assets to invest in which both deliver socially and generate long-term stable returns.

In few areas has this strategy and this vision played out more obviously than in L&G鈥檚 headlong plunge into residential development, where it has a plan to build 10,000 homes per year 鈥� which would make it the UK鈥檚 fourth biggest housebuilder. But L&G鈥檚 investment has not been plain sailing. 

While its traditional housebuilding activities have progressed well, the more innovative activities have struggled through choppy waters. The modular business it set up six years ago has racked up more than 拢170m in losses and is yet to turn a profit, while its flagship later living business, Inspired Villages, is also loss-making. I meet Wilson at the launch of a major modular scheme 鈥� Bonnington Walk, in Bristol 鈥� to ask him what has made it all so hard, and whether his patience with the sector is limitless.

Unconventional

An unconventional FTSE 100 chief executive, this former council estate boy from County Durham is a capitalist who claims welfare state founder William Beveridge as his hero and has Karl Marx sitting on his bookshelf. And, with the UK gripped by a housing crisis, the residential development sector unsurprisingly meets all of Wilson鈥檚 requirements for 鈥渋nclusive capitalism鈥� 鈥� real physical assets, that can meet an urgent social need, and that can deliver a solid financial return for L&G鈥檚 many pension holders.

鈥淭he world still is full of lots of money,鈥� he says, 鈥渢hough it鈥檚 a bit more expensive than it used to be. But it needs recycling in a way that makes a difference in people鈥檚 lives.鈥�

鈥滻 got to move into a new council house鈥� and that really created a platform for the rest of my life. I would never have been here today if I had continued to live [鈥�] in a massively overcrowded house鈥�

Sir Nigel Wilson

 

It is a message which clearly resonates with L&G鈥檚 public sector customers, such as Bristol鈥檚 Labour mayor Marvin Rees, and maybe makes its 拢2.2bn in annual pre-tax profit easier to justify. Speaking at the same event, Rees said: 鈥淚 really value some of the public commentary that we have from L&G about the nature of the economy and capitalism, and how we make sure values are stitched into the way the economy works. Having that commentary is incredibly valuable to all of us.鈥�

But the housing push seems more than just fitting the inclusive capitalism mould. A one-time director at commercial developer Stanhope, Wilson also clearly has an affinity with the development trade 鈥� one of his catchphrases is that cities 鈥渁ren鈥檛 overbuilt, they鈥檙e under-demolished鈥�. 

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But there鈥檚 clearly personal history with housing too. He says: 鈥淲hen I grew up, I grew up in Newton Aycliffe, which was a new town. I got to move into a new council house, [into] a two-bedroom house, very different at the time 鈥� we were just so excited about it.

鈥淚 went to the local new school, with new teachers, new everything 鈥� and that really created a platform for the rest of my life. And that created an opportunity, and I would never have been here today if I had continued to live with my grandparents in a massively overcrowded house.

鈥淲e want people to have those opportunities today.鈥�

Since taking the top job, Wilson has overseen a dizzying array of investments in the housing sector. Through the group鈥檚 鈥渁lternative asset鈥� business, Legal and General Capital, it owns 3,000-homes-a-year traditional housebuilder Cala, an urban build-to-rent development business, a suburban build-to-rent business, a for-profit affordable homes provider, two later living businesses, Inspired Villages and Guild Living, and its modular housebuilding business, L&G Modular.

And this is not to mention the array of wider development deals with universities and city mayors 鈥� such as a , or the similarly-sized joint venture with Oxford University.

Housebuilding revolution

In its latest results statement, L&G said that its ambition was that it will build 10,000 鈥渕ulti-tenure鈥� homes per year, made up of 3,000 homes for sale, and 3,000 homes through the modular business, with 1,000 through the suburban rental business. In addition, it claims a 5,000-home pipeline in both its urban build-to-rent and later-living businesses.

At the Bonnington Walk launch, Wilson spoke about wanting to spark a 鈥渉ousebuilding revolution鈥� through modular construction. But, despite all this, he actually rejects the idea that L&G is particularly obsessed with residential development, or has made a particularly large investment in the sector 鈥� rather this size of investment just reflects the scale of L&G overall.

鈥淓verything is large,鈥� he exclaims, referring to the group鈥檚 investments in other sectors. 鈥淲e are particularly big in solar, in offshore wind. We have 500 start-ups we are financing across the group. When people come and give a sectoral analysis, they always say 鈥榶ou鈥檙e big in this鈥�. Well we鈥檙e actually really big in all of these things now.

鈥淚n part it鈥檚 because there aren鈥檛 bigger companies in Britain. That is, I think, one of the one of the issues 鈥� that everybody [in the UK] needs to get a lot bigger and more successful.鈥�

While Cala has grown rapidly under L&G鈥檚 stewardship 鈥� and L&G鈥檚 for-profit affordable homes provider appears to be making rapid progress 鈥� some of its other residential businesses have found life more difficult, with the modular business suffering another despite finally reporting its first ever turnover.

Overnight sensations

Much has been written about its travails, but Wilson insists that reporting of the firm鈥檚 拢174m of cumulative losses since 2016 is wrongheaded 鈥� if it was the life sciences sector, he points out, journalists would describe it as 拢170m of R&D investment. 鈥淧eople forget that places like Tesla 鈥� it was started in 2003. All these things that are overnight sensations are not. They take forever to get going. The economics are not compelling [at first].鈥�

鈥淲hen you are trying to start up new business models in a country that has just got slow planning, it is very, very hard. And that鈥檚 the big challenge. How do you get to critical mass?鈥�

Sir Nigel Wilson

But he admits that 鈥渋t鈥檚 not easy鈥�, even if customers such as Bristol city council appear delighted with the product on display at the launch. So why has it been so hard? 鈥淭he challenge is the speed of planning in the UK,鈥� Wilson says, 鈥渁nd the interaction between planning and manufacturing isn鈥檛 great.

鈥淵ou know, we have a timetable. And then the timetable inevitably gets delayed for years and years. And that鈥檚 the challenge.

鈥淎merica has a very rigid system. You just go through it, and it delivers predictable outcomes. [But] the UK has a terribly unpredictable system, which doesn鈥檛 always deliver good outcomes.鈥�

He says these general issues with planning are made worse by the fact that the modular business is trying to do something innovative, so 鈥減eople want to understand it a little bit better鈥�, and because, as a start-up, it doesn鈥檛 have a vast swathe of sites to juggle between when projects get delayed.

鈥淚t鈥檚 different for build to sell because you have got hundreds and hundreds of sites, and you build that portfolio over a long, long period of time. You build that into your business model.

鈥淲hen you are trying to start up new business models in a country that has just got slow planning, it is very, very hard. And that鈥檚 the big challenge. How do you get to critical mass?鈥�

The problems that this causes, he says, are only going to intensify with the cost of capital now rising as the economy moves out of the low interest rate environment it has been in since the global financial crisis. 鈥淚n London, [our teams say] it is [taking] seven years now on average between buying a site and putting a spade in the ground. In a high interest rate environment that is just not going to be acceptable. Planning is such an awful problem in the UK.鈥�

鈥楴ever down鈥�

But, given his comments about Tesla, does L&G just continue to write off these problems as teething issues forever? Wilson is not about to say when he expects L&G Modular, which now claims a pipeline of 1,200 homes, to turn a profit 鈥� but, significantly, he rejects the notion that the firm will be allowed as long as it takes. 鈥淣o, of course we鈥檝e got shareholders as well to think about,鈥� he says, before returning to his complaints about the planning system.

But despite these challenges, Wilson is clearly one of life鈥檚 optimists, who relishes a challenge and values people with the ability to get back up and carry on when they have been knocked down. When I point out that the later living market also appears to be a hard slog, not least because every time the government understands the policy challenges, the minister responsible changes, he says, with a broad smile on his face, 鈥渆verything鈥檚 a hard slog. The world鈥檚 full of hard slogs.

I really value some of the public commentary that we have [from Nigel Wilson] about [鈥�] how we make sure values are stitched into the way the economy works. Having that commentary is incredibly valuable鈥�

Marvin Rees, mayor of Bristol

鈥淚 don鈥檛 come in on Monday morning thinking, 鈥榦h I鈥檝e got an easy week because the money鈥檚 just going to pour in, I鈥檓 going to swan around鈥�.

鈥淩esilience is a much under-rated personal attribute 鈥� we鈥檙e always up for the new challenge. And you have to be because, otherwise, you would just get frustrated consistently. I鈥檓 never down.鈥�

Now, his optimism and resilience is turning to the economy 鈥� with good reason given the gloomy outlook. He is hopeful that the mortgage market will now start to calm down given the rowing back from Kwasi Kwarteng鈥檚 mini-Budget, but says that in the meantime high interest rates will bolster the rental market and thus the development of homes for rent.

And, while chaos in central government persists, he says he continues to place his faith in local government leaders such as Bristol鈥檚 Marvin Rees, Birmingham鈥檚 Andy Street and Manchester鈥檚 Andy Burnham to be the reliable partners to L&G that central government often isn鈥檛. Time will tell if his faith is to be rewarded 鈥� and if L&G can deliver on its ambitious housebuilding dreams.