Housebuilder says completions return to pre-pandemic levels but build inflation now running at 9-10%

Britain’s largest housebuilder has said its full-year adjusted pre-tax profit will be slightly above market expectations.

Barratt, in a trading update today ahead of its full results in September, said its adjusted pre-tax profit is likely to be between £1.05bn and £1.06bn, ahead of analyst expectations of 1.048bn. The figures do not take into account building safety remediation costs of £412m, including £395m under the developer pledge signed with government.

Barratt said it completed 17,908 homes in the year to 30 June, up from 17,243 last year, meaning it is has now “returned to pre-pandemic levels”.

However, it said it experienced total build cost inflation of 6% in the year, but this has risen and is now running at currently between 9% and 10%. Its statement did not include an assurance - previously offered by Barratt and other housebuilders - that all build inflation will necessarily be covered by sales price inflation. 

It said: “Reflecting the continued strength of the market, the impacts of escalating energy costs and fuel cost inflation in relation to transportation, we are currently experiencing total build cost inflation of between 9% and 10%.”

Despite the increase in profit expectations, Barratt’s share price fell on the news, trading down 1.2% in early trading, amid recent forecasts of slowing house price growth.

The housebuilding giant said it now has total forward sales totalling £3.62bn, up from £3.47bn the previous year . Its net private reservations per active outlet rose from 0.78 to 0.81.

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It said it hoped to continue to deliver volume growth of 3-5% per year while delivering 23% gross profit margins, but added: “Looking forward, we recognise that significant macro-economic uncertainties remain, most notably around rising inflation and interest rates and their consequent impacts on UK economic growth, employment, as well as consumer confidence and spending.”

Barratt has a target of building 20,000 homes a year and said it has “we have put in place additional building blocks for future growth” beyond this. It has opened two new divisions – in Sheffield and Norwich - and said it is also planning to open a new timber factory near Derby.

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A Fair Deal for Housing 

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Housing Today believes the government should not back away from its manifesto pledge of building 300,000 new homes a year by the middle of the decade. We badly need more homes, and a lack of supply is a major factor in creating problems of affordability for both buyers and renters.

Over the next few months, Housing Today  will be exploring potential solutions to help us ramp up housebuilding to 300,000. These are likely to include different ways of working, funding asks of government and policy ideas that could boost housebuilding.

We want to hear from you: what do you think can make a difference at a policy level?

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We believe that, with the right commitments from ministers and the industry, it is possible to build more homes and help the government to meet its objectives to “build beautiful”, improve quality and safety, boost home ownership and level up the UK.

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