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UK Housebuilder Slashes Costs as Shares Tank
1 Apr
Summary
- Berkeley stops buying land and freezes hiring due to geopolitical instability.
- Company anticipates over £1.4bn pre-tax profit from 2027 to 2030.
- Shares plummeted 18% on Wednesday morning, marking a significant drop.
Berkeley, a prominent UK housebuilder, has announced significant cost-cutting measures, including a halt in new land acquisition and a freeze on hiring new staff. This strategic shift is attributed to "geopolitical volatility" and the anticipated impact of the Iran war on the property market. The company also plans to reduce its reliance on subcontractors.
These actions follow a notable 18% drop in Berkeley's shares on Wednesday morning, making it the worst performer on the FTSE 100. The housebuilder now projects pre-tax profits exceeding £1.4bn from 2027 to 2030, a revision from earlier forecasts. This period of reduced investment is seen as a response to "unprecedented" cost increases and regulatory burdens.
Berkeley cited weak buyer demand and a continuous rise in taxes and regulations as reasons for stopping new land purchases. The war in Iran has fueled inflation, elevated interest rates, and increased mortgage costs, with average UK mortgage rates surpassing 5%. This challenging environment affects the UK's housing targets, as other major builders like Barratt, Redrow, and Persimmon have also seen significant stock value declines.
