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UK builders: Fluctuating stocks reflect more than refurbishment costs

British builders add up the security costs. The sector, which has been locked in talks with the government for most of this year, began in the wake of the Fire 2017 in London’s Grenfell Tower apartment block, killing 72 people.

The latest funds reflect a wider range of sanitation and repairs. Now includes medium-high blocks ranging from 11 to 18 meters in height. The developers spent the past week calculating the totals and releasing new regulations in a flurry of statements. In round figures – including private companies as well as provisions not yet announced – this is expected to double the total pot to £2bn. That’s well below the £4bn sought by Housing Secretary Michael Gove.

There are other ways to bridge the gap. That Building Security Fund, funded by a 4 percent tax on the sector’s profits over 10 years, is an option. This also applies to opening up other parties in the development process. Gove has ruled out hooking tenants but is bringing in materials manufacturers.

Lex charts showing home builder security costs and share price of the top 5 UK home builders

Investors seem to see the burden falling on homebuilders, perhaps through another levy. Shares in the big homebuilders are down about a quarter this year, leaving some trading below book value.

Certainly not everything is due to sanitation problems. Rising mortgage rates depress activity. The cost of living crisis and the war in Ukraine with the subsequent slump in economic growth are putting a strain on house builders – as is the general weakness of the market.

Most provisions are manageable. Berkeley, for example, hasn’t taken any additional precautions, meaning it’s already content with the money it’s set aside. Persimmon’s £75million is the same amount former boss Jeff Fairburn received when he resigned in 2018. These are small prices to pay for safe houses.

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https://www.ft.com/content/da1fd656-bb22-48ac-a38f-95bbedaf09bc UK builders: Fluctuating stocks reflect more than refurbishment costs

Adam Bradshaw

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