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Freedom of information request reveals peak in housebuilder insolvencies

A record number of housebuilders are continuing to go bust, according to official data obtained by accountancy firm Price Bailey.

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According to data obtained from the Insolvency Service under the Freedom of Information Act, 368 housebuilders fell into insolvency during 2019. The total compares to 312 the year before, 253 in 2017 and 207 in 2016, representing a 78 percent increase over three years.

 

Price Bailey said that while many of the UK’s large listed housebuilders (such as Persimmon and Bovis Homes) have posted record profits in recent years, SME housebuilders have been squeezed by a convergence of factors, including stagnant house prices in London and the south east, plus rising material and labour costs.

 

The depreciation of the pound has also pushed up prices of raw materials and the exodus of eastern European workers has contributed to high wage inflation, Price Bailey claimed.

 

The statistics were published as CAPA, the audit and property consultancy, announced an instruction to audit sites on a housebuilder, now in administration, that had operated with a strong regional presence in the north west.

 

CAPA was called in by Grant Thornton, administrators of Pochin Construction Ltd, to audit sites that the insolvent contractor and builder had traded from.

 

Pochin was one of several firms within a construction and property development group, established more than 80 years ago. The group delivered projects around the north west and at its peak, was posting £60m in turnover. CAPA’s auditors are now analysing data on costs across its sites, to recover any overspend for the creditors.

 

Other regional and SME-sized builders have suffered similar fates. Price Bailey pointed out that Newcourt Residential, a small housebuilder focused on the high-end market in London and the south east, collapsed in August 2019 after it ran into cashflow difficulties, while three property development companies owned by Kevin McCloud, presenter of Channel 4’s Grand Designs, went into liquidation last October.

 

The largest housebuilders, however, have enjoyed the opposite experience in recent years.

 

Paul Pittman, partner at Price Bailey, said: “Many of the listed housebuilders paid out record amounts in dividends last year as profits were boosted by the government’s help-to-buy scheme. Their success has obscured growing financial distress in the rest of the housebuilding sector. Housebuilding in England reached a 30-year high in 2019 but the collapse of a record number of smaller developers threatens to undermine progress.”

 

He added: “Subdued activity and falling prices as people defer purchases due to coronavirus and Brexit uncertainty will continue to exact a heavy toll on the smaller housebuilders who do not have the financial cushion of their listed rivals.”

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