Shares in the UK’s major housebuilders lost more than £1 billion in value in the first hour of trading after the government unexpectedly said it would force them to fix cladding issues on more high-rise buildings at an estimated cost of up to £4 billion.
The hardest-hit stocks were Persimmon (PSN) and Barratt Developments (BDEV), down 3.5% apiece for a combined loss of almost £575 million, although the damage extended across the sector with smaller developers such as Countryside (CSP) and Vistry (VTY) also losing around £70 million each in market value.
Cladding on tower blocks has been a major political issue since the devastating Grenfell fire in June 2017. The cost of making blocks safe is meant to be met by the freeholder, who owns the building, but in many cases has been passed to the leaseholders who own the individual flats.
FURTHER REMEDIATION
The government previously pledged more than £5 billion to remove unsafe cladding from the highest-risk buildings, those over 18 metres high, funded in part by a levy on developers.
It also introduced a new 4% tax on the profits of large residential property developers from April 2022 to help fund the removal of unsafe cladding as part of its Building Safety Package.
Today’s press release from the Department for Levelling Up, Housing and Communications goes further, saying the companies have been given a deadline of early March ‘to agree a fully funded plan of action including remediating unsafe cladding on 11-metre to 18-metre buildings, currently estimated to be £4 billion’.
It also warns the government will ‘take all steps necessary to make this happen, including restricting access to government funding and future procurements, the use of planning powers and the pursuit of companies through the courts’.
If the companies still refuse to comply, the government ‘will if necessary impose a solution in law’ according to the statement.
