House building Bellway warns of ‘significant’ costs from Michael Gove’s cladding proposals

Bellway faces “significantly” higher costs linked to the cladding crisis if the government pushes forward with proposals to make the building industry pay to fix historic fire safety issues.

Bellway said it would have to take “a significant additional provision” if Housing Secretary Michael Gove is successful in efforts to get developers to fix cladding issues on properties built over the past 30 years.

Bellway has so far set aside £186 million to fix cladding, including an extra £22 million today to deal with building material inflation. Its provisions cover tower blocks built over the past 12 years.

The government is pushing for builders to contribute to the cost of fixing fire safety on blocks above 11 meters high built within the last three decades.

Bellway “has a long history of building apartments, particularly in the mid-2000s, when some 50% of output was flats,” the company said, meaning any extension of the liability window would be costly.

Bellway is “proactively engaging” with Gove’s department and “assessing the additional cost that could arise.” Putting a figure on it is tough because “this is a highly judgemental area,” the company said.

The warning came as Bellway hiked its dividend after a strong period of sales and profits. Revenue rose 3.5% to £1.78 billion in the six months to January 31 and pre-tax profit climbed 9.8% to £307.6 million. The interim dividend rose from 35p per share to 45p.

Chairman Paul Hampden Smith called it a “strong set of results” and said the company was “well positioned to deliver future growth… despite global uncertainty”. The company has 7,491 of pre-sold homes on its books and the average selling price for the year is on track to be £305,000.

Bellway shares dropped 56p to 2544p.

Ross Hindle, a senior analyst at Third Bridge, said: “Rising costs, staffing shortages and cladding issues remain the three key challenges facing Bellway.”