Contractor warns of transition period between funding models but welcomes “good start” to financial year

Kier Group has warned of a “hiatus” in affordable housebuilding while the government switches from subsidising construction through a grant to allowing authorities to charge tenants up to 80% of market rents.

“The Comprehensive Spending Review has introduced changes to the funding of new build social housing from a capital grant to an affordable rent basis of up to 80% of market rent,” the company said in an interim management statement to the City this morning.

“These changes will promote social housing development in the medium term, however there is likely to be a hiatus while these funding models are established.”

The group otherwise said that it was trading in line with expectations despite challenging conditions.

“We are pleased to report that the group has made a good start to the new financial year with first quarter trading broadly in line with our expectations. Our cash position remains strong and we have healthy order books in construction and support services,” it said.

It said that although it was too early to work out the full implications of the Comprehensive Spending Review, in would trigger “a greater focus on maintenance - including life cycle costs - than new building across all departments, which aligns well with the integrated service offering across our construction and support services divisions.”