Persimmon blames labour and material costs for 10% drop in completions

Persimmon, one of Britain’s biggest housebuilders, said shortages of materials and labour contributed to a 10% drop in the number of homes built in the first half of the year.

Julia Kollewe www.theguardian.com 

The company completed 6,652 homes in the first six months of 2022, down from 7,406 a year earlier. It blamed further delays in the planning system, as well as material and labour shortages. Customer inquiry levels were healthy and cancellation rates low, Persimmon said.

Prices for key materials such as timber and steel have rocketed since Russia invaded Ukraine in late February. Bricks and blocks have been in short supply, along with windows and boilers at times, according to Dean Finch, the Persimmon chief executive, while labour shortages – for example plasterers – have had a bigger effect, forcing the company to pay workers more.

Soaring raw material prices, shipping and energy costs, coupled with higher wages, have hit builders across the sector, in particular smaller firms. More than 3,400 smaller construction businesses, many of which are family-run, went into administration in the year to April, the highest number since the financial crisis, according to the Office for National Statistics.

Persimmon shares fell 5.5% on Thursday morning, making it the second biggest faller on the FTSE 100.

Total revenues in the first half fell 8% to £1.7bn, while forward sales were slightly higher than this time last year at £1.87bn.

The housebuilder, which has sought to rebuild its reputation after a damaging scandal over poorly built homes and a public backlash against its former boss Jeff Fairburn’s £75m bonus, expects to complete 14,500 to 15,000 homes in 2022, compared with 14,551 last year.

The firm said first-half profits would be slightly higher than expected because house price inflation has offset rises in build costs. Its average selling price increased by 4% year on year to £245,600 in the first half, reflecting strong demand and a reduction in the proportion of homes sold to its housing association partners.

The UK housing market has defied expectations of a slowdown so far, with prices rising at the fastest annual rate in 18 years last month, according to Halifax, one of the country’s biggest mortgage lenders. Experts are expecting the market to cool in coming months, however, as the cost of living squeeze and higher interest rates affect people’s ability to buy.

Finch said: “Delays in the planning system, disruption in material supply chains and challenges in securing labour have impacted completions in the period. We anticipate, however, profit at the half year to be modestly above our expectations reflecting strong demand and positive pricing conditions. Our forward sales position is robust.”

UK housebuilding declined in June for the first time in two years, an industry survey showed this week. The housing market has been surprisingly strong throughout the Covid-19 pandemic, fuelled by the government’s temporary stamp duty cut and people’s desire to move to larger homes and greener surroundings amid a rise in home working.

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