1st Apr 2026 09:03
(Alliance News) - Berkeley Group Holdings PLC on Wednesday said it will stop buying new land and cut work in progress as the Iran war and a tough economic backdrop weighs on the UK housing market.
In an unscheduled trading update, the Surrey, England-based housebuilder said it was taking "decisive action to maximise long term shareholder value" by re-phasing the delivery of its 'Berkeley 2035' strategy over the four years to 2030.
Berkeley said its fears, expressed in a recent trading statement, that the economic consequences of the conflict in the Middle East could reduce confidence in a near-term market recovery has "now become a reality".
The housebuilder also pointed to an "unprecedented" increase in cost and regulation in the UK in recent years, at a time of increasing interest rates and faltering consumer confidence.
"With the ongoing conflict and deterioration of the economic outlook, we are reducing work in progress investment to match the sales levels we are currently achieving. We are forecasting we can absorb the expected cost inflation through optimisation of our land holdings," Berkeley said.
It added that it won't acquire new land while these conditions prevail, as it "does not believe it can make its required rate of return on investment."
Berkeley anticipates delivering above GBP1.4 billion of pretax profit, over financial 2027 to 2030, which analysts at RBC Capital Markets said was 29% below Visible Alpha consensus of GBP1.98 billion.
The firm still expects to deliver pretax profit of GBP450 million in the financial year that ends April 30, which would be down 15% from GBP528.9 million in financial 2025, with around GBP300 million of net cash.
In response, shares in Berkeley slumped 18% to 2,820.00 pence each in London on Wednesday morning. The wider FTSE 100 index was up 1.6%.
Berkeley said the profile of pretax profit will likely be slightly weighted towards 2027 and thereafter broadly evenly spread.
The firm is targeting to achieve a return on capital employed in the core business of at least 15% "as soon as possible", and between 11% and 15% in the intervening years. In the financial year to April 2025, the company reported a ROCE of 16.5%.
The firm will target operating margin within its historic range of 17.5% to 19.5%.
Berkeley said it will continue to strengthen the balance sheet, maintaining net cash across the period with land creditors continuing to reduce.
"This will allow Berkeley to increase investment at the point when the market and regulatory environments inflect, accelerate shareholder returns or increase investment in Berkeley Living as appropriate," the firm added.
By Jeremy Cutler, Alliance News reporter
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