Berkeley Group reports stuttering level of new starts

In the seven months following the Brexit vote – August to February – the construction firm said underlying reservations were also down by 16% on the comparable period for the previous year.

The firm said the reduction was across all price points and reflected both the uncertainty created by the vote as well as changes around Stamp Duty and mortgage interest deductibility.

Analysts have suggested the construction sector could face serious challenges in meeting building demand in the wake of an EU-worker exit and already limited UK workforce.

Raising concerns

Berkeley also raised concerns about the impact the fall in new starts could have.

It said: “Berkeley is concerned by this under-supply and the knock-on effect it has on the provision of housing of all tenures which, if not addressed, represents a threat to London remaining the inclusive and open global city which is so important to London and the UK’s growth and prosperity.

“We therefore welcome the government’s white paper and the mayor’s continued focus on housing but note that these will take time to effect change, given the competing priorities.”

Top end of expectations

Despite its slow progress, Berkeley said it would meet analysts’ expectations and the trading update stated: “Pre-tax profits for the year ended 30 April 2017 are expected to be at the top end of analysts’ expectations, with the actual outturn dependent upon completion timing on Berkeley’s larger developments. A similar level of profitability is anticipated for the year ending 30 April 2018.”

It added: “Berkeley is in a strong position and remains on target to meet its ambition to deliver at least £3bn of pre-tax profit over the five years ending 30 April 2021. Forward sales are expected to be in excess of £2.6 bn at 30 April 2017 at the prevailing sales rate and Berkeley remains ungeared.

“We continue to make selective acquisitions to our well bought land bank from which we can add value, delivering homes of all tenures in balanced and vibrant new communities that include shops, schools, new open spaces and other community facilities,” it added.