Housebuilder pledges to work with government to ensure controversial £3bn levy is ‘fair’
Persimmon wants the government to ensure that the controversial £3bn cladding costs levy takes into account contributions already paid for fire safety by “parts of the industry”.
In a trading update this morning, the housebuilding giant said it would consult with the government on the proposed levy, which is intended to fund repairs to “orphan” buildings – developments where the owner or company responsible for building work cannot be traced.
The cladding costs levy is on top of the developer pledge, whereby 37 housebuilders including Persimmon have so far agreed to fix “life-critical” fire safety issues on their own blocks built in the past 30 years.
The levy, which will apply to all residential buildings, has been criticised by housebuilders many of whom feel it is unfair as it not only comes on top of the developer pledge but also the residential property developer tax, which is designed to raise between £2bn-3bn to pay for the remediation of blocks of more than 18m in height.
In its trading update covering the period from 1 January to today, Persimmon said: “While many of the specific details remain subject to consultation, the government has indicated that it expects the levy to raise up to £3bn over 10 years.
“Alongside the rest of the industry we will consult with government over the design, implementation and scale of the levy with the aim of ensuring that it fairly balances the funding needed with contributions already made by parts of the industry.”
Persimmon, which has largely built low-rise propeties in the past, has previously set aside £75m for fire safety remediation which it believes will be enough to meet its pledge commitments and carry out previously planned works. Other housebuilders have made much larger provisions, with Barratt allocating up to £400m at the start of the month.
Persimmon also reported today that it expects to hit its volume growth targets for the year following a 2% increase in sales in the first few months of the year.
The £3.6bn-turnover housebuilder says its first half completions are likely to be below the 7,406 reported for the first half of the previous year, due to it having a relatively low number of new outlets (290). However, it said that it is opening 75 more outlets in the first half of the year which should lead to a boost in completions later in the year. It expects growth of between 4% and 7%, which would equate to between around 600 and 1,000 extra completions in 2022 on top of the 14,551 completed in the last full year.
Persimmon’s average selling price is £266,000, up from £252,000 in the same period last year.
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It said expects to maintain its margins. In 2021 it reported an underlying operating margin of 28%.
It said: “The UK housing market remains supportive, and Persimmon is well-placed for the future, with a strong and experienced senior management team, positive momentum in outlet openings, improving build quality and customer service and growing land holdings with industry-leading embedded margins. “While we remain mindful of current uncertainties, particularly regarding consumer confidence, rising interest rates and the impact of the tragic conflict in Ukraine, the Board is confident of the Group’s future disciplined growth and success.”