UK housebuilders face slow and painful refurb

Persimmon signage is seen at a building site in Durham
Persimmon signage is seen at a building site in Durham. Durham, Britain, March 25, 2020. REUTERS/Lee Smith/

LONDON, March 1 (Reuters Breakingviews) - UK housebuilding is facing a bleak future. That’s the message from Persimmon (PSN.L) which warned on Wednesday that a slowdown in the UK housing market, caused by higher interest rates and soaring costs, will hit its sales and profitability. The outlook is so murky that Chief Executive Dean Finch was unable to provide any forecast for the year but slashed the company’s dividend by 75%.

To add to the misery, the government seems unwilling to come to the rescue. In previous slowdowns, the UK’s Conservative Party bailed out the sector with packages like Help to Buy, which subsidized mortgages to help buyers. However, this facility is ending this month. After Grenfell Tower went up in flames in 2017, the government has been looking for ways to raise funds to repair unsafe buildings, and may apply a new 4% surcharge on housebuilders’ profit.

That all explains why Persimmon is not forecast to return to its pre pandemic sales for at least the next four years, according to Refinitiv forecasts. After Wednesday’s 9% share price decline, it’s share price is now worth less than half of what it was before the outbreak of Covid-19. With little help on the horizon, UK housebuilders face a slow and painful rebuild. (By Aimee Donnellan)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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