Barratt has initiated a freeze on staff recruitment and put the brakes on further new site openings as it sees a ‘marked slowdown’ in demand for homes.
In Barratt’s latest trading update for the half year up to 31 December 2022, chief executive, David Thomas, stated that a turbulent first half of the year had led to tighter controls on the company’s spending.
Thomas said: “Political and economic uncertainty impacted the first quarter, this was then compounded by rapid and significant changes in mortgage rates which reduced affordability, homebuyer confidence and reservation activity through the second quarter.”
As a result of the continuing uncertainty, the housebuilder saw net reservations per week in the last quarter of 2022 drop to 0.3 from close to 0.7 year-on-year, a reduction of over 50%. The company’s forward orders dropped significantly from 14,818 to 10,511 homes in the same period.
Barratt’s previously healthy forward order book allowed the business to keep momentum in the second half of 2022, Thomas warned that Barratt would now slow its construction activity to brace for the impact of falling demand.
Thomas continued: “We have delivered a strong operating performance for the six months to 31 December 2022. This was possible because of our significant forward order book up to 30 June 2022 and the tremendous efforts of our employees, subcontractors and supply chain partners.”
“Construction activity moderated in the second half of the period as the business moved to align production with slowing reservation activity.”
“During the second half, we anticipate construction activity will continue to moderate as customer commitments within our order book are satisfied and as construction activity continues to align with reservation activity.”
Looking forward, he said: “We have taken a number of actions to respond to current market conditions, including significantly reducing land approvals, pausing recruitment of new employees and introducing further controls for new site openings to manage our working capital deployment.”
“Reservation activity in the first quarter of the new calendar year will determine whether any further action will be required.”
The second half of 2022 saw Barratt’s total home completions reach 8,626, a 7% increase year-on-year. The housebuilder’s private average selling price increased by 13.6%, rising from £327,400 to around £372,000, which the update says reflects an increased number of London-based completions, a positive mix impact, and house price inflation.
