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Berkeley expects profits to fall 50% next year

8 Dec 17 House-builder Berkeley Group is on course for ever greater profits this year but is braced for a 50% fall next year as its business returns to what it calls more normal levels.

Berkeley Group chairman Tony Pidgley
Berkeley Group chairman Tony Pidgley

Berkeley Group said that it expects to make £1.5bn of pre-tax profit over the two financial years of 2017/18 and 2018/19. However, £900m of this will be this year and only £600m will be in fiscal 2018/19 because of project phasing.

Announcing its interim results for the six months ended 31st October 2017, Berkeley Group Holdings posted first-half revenue up 14% to £1.6bn (2016 H1: £1.4bn) and pre-tax profit up 36% to £533m (2016 H1: £393m).

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Despite having hit a peak, Berkeley remains reasonably bullish about prospects. The focus of its operations is London and the southeast. “While the political context for housebuilding is turbulent, where there is stability, the potential for growth and delivery remains strong,” said chairman Tony Pidgley. “The London mayor, Sadiq Khan, has set out his priorities very clearly. We support the increased target in the draft London Plan of 66,000 new homes a year. In our experience, the mayor is open for business and prepared to fast-track sites that achieve the threshold of 35% affordable housing.”

He added: “It is crucial that new housing policies support the London market, not least because the capital is so important to prosperity throughout the rest of the country. In this respect, the decision to invest in Crossrail 1 is now paying off handsomely and so too would a strong, unambiguous commitment to Crossrail 2. We also remain of the view that the Community Infrastructure Levy (CIL) is not well suited to large developments, and urge the Government to adopt an approach where the infrastructure and affordable housing for sites with more than 100 homes are funded through Section 106 agreements, with the sites exempt from CIL. Furthermore, while continuing to protect the Greenbelt, we must be prepared to develop the urban fringe where this has little amenity or community value in its existing use.”

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