Berkeley keeping close eye on subbies as market softens
House builder Berkeley Group is promising to support its supply chain as the fear of firms going bust replaces rampant inflation.
In its half-year report today Berkeley said: “The sharp build cost rises of recent years have now responded to the prevailing conditions and, for Berkeley, cost inflation across the majority of trades has receded to negligible levels in line with our expectations.
“The greater supply chain risk is now that of contractor insolvency as the inflation cycle reverses and demand for construction services reduces.”
Chief executive Rob Perrins added: “Given the elevated macro uncertainty, Berkeley continues to work with and support our established supply chain partners to ensure sustainability of the supply chain and delivery on our development sites.”
Berkeley posted a strong set of number despite a market slump which has seen reservation rates drop by around one third.
Pre-tax profit was up to £298m for the six months to October 31 2023 from £284.8m last time on turnover of £1.19bn from £2bn.
Berkeley is now waiting on a lot of its land bank for better market conditions to build out sites.
Perrin said: “We are ready and able to deploy capital into new opportunities once the market and regulatory cycles inflect and returns can be earned commensurate with the level of upfront investment and operational risk we undertake.”
He also called for more government help via improvements to the planning and regulatory system.
Perrin said: “Despite urban regeneration being a clear national priority, it has become increasingly difficult to progress this form of development as changes to planning, tax and regulatory regimes have created an increasingly uncertain, unpredictable and burdensome environment.
“This is driving investment away from urban areas, restricting growth and preventing homes and other tangible benefits being delivered.
“It will lead to lower productivity, fewer jobs being created and net zero being harder to achieve, as the efficient re-use of land in urban settings to deliver, well-connected, nature-rich new communities, near existing infrastructure is the most sustainable form of development.”