UK homebuilder Persimmon flags cost concerns after strong Q3 sales

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(Reuters) -British homebuilder Persimmon’s sales rates since the start of the third quarter were well ahead of last year, it said on Wednesday, but flagged concerns about higher costs emerging in price negotiations for 2025.

The prospect of rising costs that could offset an improvement in sales across the British building sector is underscored by expectations rising inflation, spurred by the UK government’s October budget, will lead the Bank of England (BoE) to delay interest rate cuts.

The BoE is due to annouce a rate decision due on Thursday.

“We are working closely with our supply chain to manage our costs, which will also be impacted by new building regulations and the employer national insurance increases announced in the recent (UK) budget,” the company said in a statement.

Shares in the FTSE 100-listed builder dropped by more than 2% in early trade, underperforming the wider sector.

In her first budget since the Labour government took office, British finance minister Rachel Reeves raised employers’ social security contributions by 1.2 percentage points to 15% from April to raise revenue. Some companies have said it could hinder economic growth due to elevated payroll costs.

Since the government took office in July, however, a rise in planning permissions has given Persimmon a boost.

It said net private sales rate per outlet rose 37% year-on-year since the start of the second-half period on July 1.

The company, which offers a range of homes from studio apartments to five-bedroom houses, said its private forward sales position since July 1 jumped 40% to 1.45 billion pounds ($1.87 billion).

Last month, another homebuilder Vistry also flagged cost concerns. It cut its annual profit forecast after discovering that one of its divisions had understated the cost of some of its developments, and analysts had raised questions whether the issues flagged were one-off and were company-specific problems.

Persimmon’s bigger rival Barratt Redrow last month said it was beginning to see more stable market conditions with increased mortgage affordability.

($1 = 0.7770 pounds)

(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Varun H K and Barbara Lewis)