Output surges as material prices level; housebuilders report strong results

Material prices level out for the first time in a year, as construction output surges

Latest statistics from the Department for Business, Energy and Industrial Strategy (BEIS) have revealed that overall material prices remained flat in the month to November 2021 – the first time since September 2020.

The price of steel and timber – which both saw significant price increases in 2021 – reduced in the period, with sawn or planed wood reducing by 7.6%, and steel prices falling by 0.3%

Meanwhile, construction output has bounced back to pre-pandemic levels after a surge in new work in November.

Despite a small decline in repair and maintenance workload, overall construction output rose by 3.5% in the period. Total work is now running at 1.3% above the February 2020 high.

The Office for National Statistics, who published the data, pointed to the easing of material shortages and a strong demand for work as the driving factors behind rising output.

This was echoed by the latest Markit / CIPS UK Construction Purchasing Managers Index, which placed December 2021 at 54.3 – above the no-change threshold of 50, albeit a slight drop from 55.6 in November.

Housebuilder shares drop in wake of Government cladding levy

The value of listed UK housebuilders fell sharply this week, following a Government announcement that it expects the sector to contribute £4bn towards repairing unsafe cladding.

Housing Secretary Michael Gove called on the industry to work with the Government to agree a funded plan to fix the cladding crisis, including the remediation of cladding on 11-18m buildings.

Gove has given the industry a “window of opportunity” to produce the plan, with a deadline of early March.

House of Lords calls for SME builder support, as Sadiq Khan calls for temporary visa scheme

A report produced by the cross-party Lords Build Environment Committee has called on planners and the Government to give favourable treatment to SME housebuilders.

Meeting housing demand states that the Government should work with local planning authorities to create a fast-track planning process specifically to help smaller housebuilding companies.

“The role of SMEs in the house-building industry has collapsed: in 1988, SME house-builders built 39% of new homes; now they build just 10%,” the report says. “If housing demand is to be met, SMEs should be supported through reduced planning risk, making more small sites available, and increased access to finance.”

Meanwhile, Mayor of London Sadiq Khan has called on the Government to introduce a temporary visa scheme to tackle the skills shortage within the industry.

Amid warnings that workforce shortages could affect housing plans, the scheme is proposed to alleviate the double impact of Brexit and the pandemic on labour supply.

Perhaps Khan could call upon robotic support to meet housing demand: an Automatic Brick Laying Robot (ABLR), built by Construction Automation, has secured accreditation from warranty and insurance provider NHBC.

Housebuilders announce results to the City, with differing fortunes

A number of housebuilders announced their results this week, with most reporting strong performance.

Firstly, Cala reported that sales of new homes were above pre-pandemic levels, reaching £1.25bn for the first time. The Legal & General Capital-owned builder said it was on focused on further strong expansion targeting £1.8bn revenue by 2026.

Vistry Group also saw “excellent performance” throughout 2021, with the business anticipated adjusted pre-tax profit for the year of around £345m. The company also reported an increased private sales rate, increasing to 0.76 per week from 0.53 in 2020.

Meanwhile, Persimmon reported that turnover increased by more than 8% in 2021, with income reaching £3.61bn – almost reaching pre-pandemic levels of £3.65bn in 2019.

However, Countryside saw shares fall by 20% as performance in the first quarter was “below expectations”, with operating profit falling by 55%. Chief Executive Iain McPherson also left the business with immediate effect, with Chairman John Martin taking the reins whilst a replacement is sought.

Martin blamed poor performance partly on planning delays and supply chain disruption, stating that he would not provide further guidance on future financials until he had undertaken a site-by-site review of the firm’s operations.

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