In a trading update for the first six months, chief executive David Thomas warned that the first half of the financial year had seen a marked slowdown in the UK housing market prompting stricter controls on Barratt’s spending.
He 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 net reservation rates per week per site in the last three months to Christmas more than halved to 0.3 from nearly 0.7 in the prior year period.
A sharp fall in demand has impacted the firm’s forward order book which slumped to 10,511 homes from 14,818.
Thomas said Barratt’s previously strong forward order book had helped the business maintain momentum in the six months to December but warned Barratt was now preparing for the impact of falling demand by slowing down construction activity.
He said: “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 at 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.”
Moving ahead Thomas added: “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.”
He said: “Reservation activity in the first quarter of the new calendar year will determine whether any further action will be required.”
Thomas said that if the Spring selling season saw reservation rates return to normal levels total home completions would remain on track for 17,475, but if trading remained at present levels completions were forecast to fall to 16,00o by the summer full-year close.
