Build cost inflation to hit 5% this year, says Taylor Wimpey

Taylor Wimpey’s margins are likely to be hit this year as a result of higher build costs, the housebuilder told investors today.

Inflation was rising faster than expected as uncertainty around Brexit was leading some suppliers to stockpile materials in the event the UK crashes out of Europe without a deal.

In a trading update ahead of its AGM today, Taylor Wimpey warned it had seen higher-than-expected cost inflation in early 2019, notably in materials, and now expected build cost inflation for 2019 to be around 5%.

The increase was being driven by several factors, including a “higher than expected demand in the short term from defensive additional buffer stock holding in the construction industry supply chain”.

It also pointed to the impact of underlying cumulative inflation and exchange rates on the cost base of suppliers.

Volumes would be slightly higher than 2018’s 14,933 completions, but higher build cost inflation would mean margins would be “slightly lower” than last year’s 22%, the group said.

Taylor Wimpey said the market for new-build housing had remained stable in the first four months of 2019, and while it would meet its overall expectations for the year, results would be weighted towards the second half.

Last year the group reported pre-tax profit of £657m on turnover of £4.1bn.

Taylor Wimpey also said it would be submitting a revamped remuneration policy to shareholders in a binding vote at next year’s AGM.

Pay deals for senior executives at listed UK housebuilders have come under scrutiny following the furore that followed the £75m bonus awarded to Persimmon chief executive Jeff Fairburn last year.  

In 2017 Taylor Wimpey’s chief executive, Pete Redfern, received £3.8m, including a £1.9m bonus.