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Barratt blames skills shortage for 4% build cost inflation

24 Feb 16 Shortages of skilled labour have eased over the past year but remain the single biggest cause of build cost inflation, according to one of Britain’s leading house-builders.

Barratt Developments, which has built 72,000 homes over the past five years, said that while it was not suffering directly from labour shortages, it was expecting build cost inflation to be between 3% and 4% this year because of it.

Chief executive David Thomas said: “Whilst we have seen an increase in the supply of skilled subcontractors over the past year, there remains an industry shortage in the UK, with increases in labour costs remaining the largest driver of overall build cost inflation.”

He added: “We are well placed with the necessary labour to meet our operational and quality requirements. We are also seeking to increase efficiency through the use of timber frame on around 6% of our plots during FY16 and through the use of alternative off-site manufacturing options, including closed panel roof solutions.”

Barratt expects to build more than a thousand timber frame homes in its current financial year.

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Barratt Developments reported half-year results for the six months ended 31st December 2015. Revenue was up 19% to £1,875.5m and pre-tax profit was up 40% to £295.0m. The operating margin improved from 14.2% last time to 16.1%.

"In line with our strategy, we have stepped up the number of completions in the first half and we did this in a disciplined way, both financially and operationally, without compromising on the quality of the homes we're building,” Mr Thomas said.

"In the past five years we have increased our annual output by more than 53%, built more than 71,700 homes and approved the investment of over £4.4bn in new land for housing. The market remains strong as a result of improved mortgage availability and government support for first time buyers and we will continue to grow in a way that delivers for the needs of homebuyers and shareholders alike."

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