(qlmbusinessnews.com Thurs. 5th Sept, 2024) London, UK —
UK’s Largest Housebuilder Reports Profit Slump as Home Completions Fall
Barratt Developments, the UK's largest housebuilder, has reported a substantial decline in profits following a significant reduction in the number of homes built over the past year. The firm completed just 14,000 homes in the year to June, down from 17,000 the previous year, and anticipates a further decrease in the coming year.
Pre-tax profits for Barratt plummeted by 75%, which the company attributes to high interest rates deterring potential buyers and rising inflation driving up costs. This development poses a challenge for the new Labour government’s promise to “get Britain building.”
Despite the downturn, David Thomas, Barratt’s Chief Executive, remains optimistic, stating that the company is “well-positioned to meet the strong underlying demand for new homes.” However, the firm forecasts it will complete only 13,000 to 13,500 homes in the next year, reflecting ongoing economic pressures.
The government has prioritised boosting the supply of new homes, committing to build 1.5 million properties in England over the next five years. To achieve this, they plan to reform the planning system, release parts of the green belt for development, and reintroduce mandatory housing targets for local authorities.
Thomas welcomed these proposed reforms, describing them as “key levers to increase house building, drive economic growth, and tackle the chronic under-supply of high-quality, sustainable homes.”
While the government remains hopeful that changes to planning policy will accelerate housebuilding, Barratt’s latest figures underscore how mortgage rates continue to influence building activity.
Aarin Chiekrie, an equity analyst at Hargreaves Lansdown, described Barratt's financial performance as “a painful read for investors,” even though the results were in line with market expectations. He noted, “With fewer homes being sold at lower prices, less cash has come through the front door.”
Chiekrie suggested that while the new government may address some challenges hindering housebuilders, such as planning regulations, “a further easing of mortgage rates will be necessary for activity to pick up significantly.”
Adding to its challenges, Barratt has increased its financial provisions for cladding removal, a critical issue since the Grenfell Tower tragedy. After assessing 53% of its buildings, the company now estimates the final cost of fixing safety issues at £628 million, up from £536 million previously forecasted.
Meanwhile, Barratt is in the process of acquiring Redrow, another major UK housebuilder, although this deal is still pending approval from the competition regulator.
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