A packed order book and record profits put the company in a strong position, says boss David Pretty
David Pretty is the very picture of calm confidence as he sits discussing his company’s financial prospects in a plush London office.
He has reason to be. Two years into his role as chief executive of Barratt, one of the largest housebuilders in the UK, he knows that he is about to reveal record profits to the stock exchange for the 13th consecutive year in the company’s interim results on 23 March.
To a City fearful of a housing crash, this news – alongside Crest Nicholson’s revelations of a 10% hike in pre-tax profit to £82.1m last week – will come as a relief.
Two weeks ago, Barratt issued a confident trading update to the stock exchange, revealing a forward order book of more than £800m for the coming financial year.
For the six months to 31 December 2004, Barratt completed 6866 homes – 2% more than in the same period last year. It achieved an average selling price of £165,000 – another 2% rise.
Despite this success, there are issues that Pretty would like to address. He is frustrated by what he sees as the public’s continuing misconception that the company is devoted to building private houses on greenfield land.
Pretty, who was group managing director and head of the company’s southern business before becoming chief executive, says more than 80% of Barratt homes completed in the last six months of 2004 were built on brownfield land. This exceeds
the government’s target of 60%. According to Pretty, that makes Barratt “Britain’s leading urban regenerator”.
The Barratt boss also has strong opinions about the lack of social housing in the UK. Although Pretty is proud that Barratt’s social housing completions more than doubled last year to 1256 homes, he points to the relentless decline of social housing provision over the past 50 years.
To support his argument, he quotes statistics from the former Department for the Environment, Transport and the Regions, which reveal that from a peak of 257,169 homes in 1954, numbers fell to 180,088 in 1970, and to a paltry 24,000 in 2000.
There is no shortage of land on this little island, just a shortage of planning permission
Government spending plans suggest that expenditure on housing in England will increase by £1.3bn between now and 2008, and that an additional 10,000 homes a year will be built during that period – still far fewer than previously achieved.
Alongside his housing peers, Pretty also bemoans the lengthy and complicated planning process that prevents a speedy turnaround of schemes. “There is no shortage of land on this little island,” he says, “just a shortage of planning permission.”
He says one practical way to handle the bottleneck of planning applications is to prioritise schemes that propose development on brownfield land.
Pretty also suggests that wider consultation should be reserved for the outline planning stage but that at detailed planning stage fewer people on the planning committee should be involved.
Administrative delays that hold back the growth of the industry also frustrate him. “I am an optimist by nature,” he says, “but pessimistic about whether production will pick up in the short term. Consultation has to stop and decisions have to be taken.”
On the subject of deputy prime minister John Prescott’s £60,000 houses, Pretty is sceptical. “The price excludes externals; it forgets about land prices, which can comprise up to 40% of the house price, and infrastructure. One solution would be if the government sold its own land at nil or minimum cost.”
As to the future, Barratt has built up a £150m war chest to buy land, and in recent months Pretty has hinted that, for the first time in some 20 years, the company may be considering an acquisition.
“Barratt is the largest housebuilder in the UK with just a 9% market share. It is still a very fragmented industry,” he says.
The outlook for the housing sector, according to Pretty, is far from bleak. He expects house prices to increase by up to 4% – and is comfortable that Barratt is in a good position to meet the needs of both the government and the public.