Redrow and Berkeley have become the latest to announce that their construction sites will close, shortly after the UK government rolled out new guidance that effectively freezes the housing market.
Berkeley, however, has become the first house builder to say it will still pay dividends to shareholders, although its annual profits are expected to fall by around £80m.
Both builders said they have opted to close the sites because of challenges with the supply chain.
Redrow told the markets earlier this week that it was keeping sites open in line with government guidance, before a number of volume builders and the social housing sector’s biggest developer – L&Q – announced site closures.
Redrow posted an updated statement to the financial markets today, confirming that it had already closed sales offices and reduced its workforce on sites to target construction operations on plots that are due to complete over the coming weeks.
“However, it has become increasingly impracticable as our supply chain has been significantly impacted in recent days. As a result the board has now decided to go further and commence with immediate effect an orderly and safe closure of all of our sites and offices.
“When there is a return to normality in the supply chain, and we are satisfied it is safe for our workforce to return to work, we will reopen sites and recommence production with an initial focus on fulfilling our substantial order book that stands at £1.4bn of which £0.9bn is contracted.”
Redrow said it has started discussions with its syndicate of six banks about extending its £250m revolving credit facility, with an additional ‘accordion’ facility of up to £100m.
It also submitted an application to the Bank of England for eligibility for the government’s COVID-19 Corporate Financing Facility.
John Tutte, chair of Redrow, said: “These are unprecedented times. The actions we have announced today will give us the flexibility to manage the business through this turbulent period to ensure we are ready to resume production when it is safe to do so.”
Berkeley Group, meanwhile, said it had also been modifying working practices to observe social distancing protocols, to continue many of its site activities.
But it said the supply chain “is experiencing understandable and increasingly considerable challenges in
maintaining the delivery of materials to site”.
“Therefore, we are now progressively managing the safe, temporary suspension of work on developments where this is the case. This will take time to achieve as critical in-progress works are brought to the stage where they can be safely suspended and secured.”
It is focusing efforts on completing a number of private and affordable homes that are close to handover and which many customers, across all tenures, will still need it to finish.
The group said it is now expecting profits for the year ending 30 April 2020 of £475m, down from the £555m it had forecast.
Berkeley said it still has cash of £1bn and liquidity of £1.75bn after paying £125m to shareholders this month. It is also planning to pay £140.1m to shareholders by 30 September 2020 through a combination of share buy-backs and dividends.
The announcements by the house builders come after government last night issued guidance asking for homeowners to postpone sales, understood to be in response to concerns from banks and lenders around valuations in the current market.
The government urged parties involved in home moving to “adapt and be flexible” and alter their usual processes.
It said home buyers and renters should, where possible, delay moving to a new house while measures are in place to fight coronavirus.
“There is no need to pull out of transactions, but we all need to ensure we are following guidance to stay at home and away from others at all times.”