Contractor insolvency biggest threat to supply chain – Berkeley

Chief executive Rob Perrins said today: “On the supply side, the sharp build cost rises of recent years have now responded to the prevailing conditions and, for Berkeley, cost inflation across the majority of trades has receded to negligible levels in line with our expectations.  

“The greater supply chain risk is now that of contractor insolvency as the inflation cycle reverses and demand for construction services reduces.” 

He added: “Given the elevated macro uncertainty, Berkeley continues to work with and support our established supply chain partners to ensure sustainability of the supply chain and delivery on our development sites.” 

Construction firms in the UK have gone under at the highest rate in a decade. Smaller construction firms continue to be overrepresented in recent industry insolvency figures.   

In its latest results, the group delivered a pre-tax profit of £298 million for the six months to 31 October 2023, 4.6 per cent up on the prior period (284.8 million), and a sustained operating margin of 19.5 per cent. 

Shareholder returns were reported at £127.6 million compared to £133.8 million in 2022, and £63.1 million in dividends were paid during the half year (HY2022: £23.3 million).  

Berkeley Group also recorded a net cash position of £422 million.  

Revenue was £1.1 billion, down 0.7 per cent on 2022. 

Berkeley said it is targeting £1.5 billion of pre-tax profit and the maintenance of net cash above £400 million over the next two financial years.  

Perrins added: “Despite urban regeneration being a clear national priority, it has become increasingly difficult to progress this form of development as changes to planning, tax and regulatory regimes have created an increasingly uncertain, unpredictable and burdensome environment.   

“This is driving investment away from urban areas, restricting growth and preventing homes and other tangible benefits being delivered.  

“It will lead to lower productivity, fewer jobs being created and net zero being harder to achieve, as the efficient re-use of land in urban settings to deliver, well-connected, nature-rich new communities, near existing infrastructure is the most sustainable form of development.” 

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