UK Markets close in 4 hrs 55 mins

Britain's biggest housebuilder shrugs off Brexit as construction at highest in a decade

Tom Belger
Finance and policy reporter
A builder carries blocks on a Barratt Homes building site in Nuneaton, central England March 20, 2014. REUTERS/Darren Staples (BRITAIN)

Britain’s biggest housebuilder has shrugged off uncertainty over Brexit, with completed homes at an 11-year high and profits likely to outdo market expectations.

Barratt Developments (BDEV.L) said profit before tax was expected to come in at £910m, up from £835.5m last year.

Chief executive David Thomas said it had been a “good year,” despite the slowdown in the wider UK property market, jitters over Brexit and recent warning signs over the construction industry.

It comes after Bovis Homes (BVS.L) sounded a similarly positive note in a trading update on Tuesday, with few signs of what an analyst called the Brexit uncertainty “sledgehammer” which has recently begun to cripple the construction sector.

Barratt said it expected to see its operating margin up from 17.7% last year to 18.9% this year.

The property giant has been cutting the number of houses it offers to boost margins, and working with suppliers to maintain smooth access to overseas goods to reduce the risks from a potential no-deal Brexit.

READ MORE: Pound down after UK construction’s worst month in a decade

Barratt said it finished 17,856 homes in the year to 30 June, up from 17,579 a year earlier.

The housebuilder also said it had made “good progress” on its planned exit from central London, where the property market has been hit badly by Brexit uncertainty and tax reforms.

The company’s growth stands in marked contrast to the subdued wider property market, which has been struggling with lower demand and in some areas falling prices since the EU referendum in 2016.

The figures also come just a week after separate data showed the wider UK construction industry suffered its worst month since the financial crisis in June.

READ MORE: MPs speechless as review of major infrastructure projects leaves out HS2

Barratts building work in the Ronkswood area of Worcester.

The monthly IHS Markit/CIPS index showed a significant contraction including in residential construction, with one analyst calling it “less of a slide than a sledgehammer.”

Shares plummeted in building materials suppier SIG (SHI.L) on Friday after it blamed a marked deterioration in activity in construction for falling first-half sales.

It comes as fears grow of a no-deal Brexit on 31 October, which Boris Johnson and Jeremy Hunt have both failed to rule out as they battle it out in the race to replace Theresa May as UK prime minister.

Neil Wilson, chief market analyst at Markets.com, said low interest rates and the government’s Help to Buy scheme were “supporting the lower end of the market,” boosting profits at Barratt and likely other housebuilders.

“Still happy hunting for housebuilders despite the headwinds of Brexit. Barratt’s numbers look very good indeed,” he said.

READ MORE: Bovis Homes booms despite Brexit construction ‘sledgehammer’