Business

Barratt mulls construction slowdown following Brexit

House building Image copyright PA

The UK's biggest housebuilder, Barratt, could slow its pace of construction in the light of Brexit.

The builder told the Reuters news agency it would also review its commitments of land on which to build, after the UK voted to leave the EU.

Despite increasing new property completions by 5% last year, it said there was greater uncertainty facing the UK economy.

Mortgage lenders also said there would be uncertainty among potential buyers.

"Brexit, and its likely effect on the market, is a question to which the answer will not immediately be forthcoming," said Paul Smee, director general of the Council of Mortgage Lenders.

"Lenders will continue to be open for business as usual, but lending volumes may be affected by uncertain consumer sentiment."

The CML said that the number of mortgages advanced to first-time buyers, movers and buy-to-let investors rose in May compared with the previous month.

"There was a sense of the market regaining some equilibrium in May," Mr Smee said, adding that lenders might be affected by the subsequent referendum result.

Barratt Developments said the impact of the vote would require a more long-term assessment.

"Following the EU referendum, we are mindful of the greater uncertainty now facing the UK economy. Consequently, the immediate outlook for our industry is less clear and it is too early to draw any conclusions regarding market conditions from the short trading period since the referendum," it said.

"We had contingency plans in place and we have taken appropriate measures to reduce our risk, such as reassessing land approvals, as we continue to monitor the market."

Speaking to Reuters, Barratt chief executive David Thomas said: "We would look at future land commitments, our current commitments, we would also look at our build programmes and the extent to which we should slow down our build programmes."

Since the vote, Barratt's share price has fallen more than 25% - alongside falls among other housebuilders - as economists warn of a slowdown that could end up hitting the housing market.

However, it said its annual pre-tax profit would increase to £680m from £565.5m last year, and that its average selling price had risen by 10.6% to £260,000.

Where can I afford to live?

The figures come as analysis by the Yorkshire Building Society suggested that the UK has built one million fewer houses since 2004 than the number needed to keep up with demand.

It pointed to the 2003 Barker Review of Housing Supply, which suggested that 270,000 houses were needed a year in England alone to bring house price inflation under control.

The building society found the number of housing completions across the UK had never reached the 270,000 level - and it said at least 1.2 million additional homes would be needed.

"The Brexit decision and the uncertainty it creates around the prospects for private sector house builders, not to mention the country's economic outlook, is likely to heighten the housing crisis," said Andrew McPhillips, chief economist at Yorkshire Building Society.

"Addressing the shortage of homes must remain high on the government's agenda regardless of the work required following the EU vote. The longer we leave the supply crisis to worsen, the more difficult it will be to resolve.

"The UK has failed to build the number of homes needed to meet demand year after year, which has consequently inflated prices and made it even more difficult for those looking to buy."

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