Barratt Developments CEO Criticizes UK Planning System Amid Declining Forward Orders
Introduction: David Thomas, the chief executive of Barratt Developments, the UK’s largest housebuilder, has expressed strong criticism of the country’s planning system. He also disclosed a significant drop in the firm’s forward order book value and cautioned about ongoing challenges in the housing industry.
Challenging Industry Conditions: The housing industry in the UK has faced a challenging environment throughout 2023. Higher borrowing costs and soaring mortgage bills have dampened demand, while the withdrawal of the Help to Buy scheme has created additional hurdles for aspiring homeowners.
Impact on Buyers: David Thomas highlighted the postponement of purchase decisions by a number of buyers, particularly first-time buyers. London and the South East regions have encountered some of the most significant challenges, with affordability being a prominent concern.
Drop in Forward Orders: As of August 27, Barratt’s total forward order book has decreased substantially, standing at £2.4 billion, encompassing 9,608 homes. This marks a notable decline from £3.8 billion, representing 14,058 homes, compared to the previous year.
Home Sales and Financial Performance: The year ending on June 30 witnessed a 3.9% decline in completed home sales, totaling 17,206. Despite this, revenue experienced a slight uptick of 1%, reaching £5.3 billion, and pre-tax profits showed a significant increase of 9.8%, totaling £705.1 million.
Adjusted Profit Decline: Adjusted profit before tax, which excludes one-off items, primarily related to cladding works, saw a notable decrease of 16.2%, amounting to £884.3 million.
Guidance for the Future: Barratt Developments maintains its July guidance, forecasting home completions for the year ending June 2024 to range between 13,250 and 14,250. David Thomas emphasized the company’s solid operational performance despite the challenging environment, highlighting Barratt’s resilience and strong financial position.
Critique of the Planning System: In his update, David Thomas did not mince words in criticizing the UK’s planning system, describing it as ineffective. He cited problems experienced by Barratt over the past year, with new developments facing constraints due to these planning challenges.
Issues Beyond Ineffectiveness: Thomas also pointed out that local authority planning departments suffer from underfunding, indicating that the problems extend beyond mere ineffectiveness and encompass broader issues within the planning and development landscape.