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Extra cladding tax will jeopardise 1.5 million homes target, warns Berkeley Group

by March 14, 2025
March 14, 2025
Extra cladding tax will jeopardise 1.5 million homes target, warns Berkeley Group

Berkeley Group, one of the UK’s biggest housebuilders, has cautioned the government that introducing another cladding tax will place “significant pressure” on its aim of delivering 1.5 million homes by the end of 2029.

The warning follows industry-wide frustration over mounting costs linked to the remediation of unsafe cladding, first highlighted by the Grenfell Tower tragedy in 2017.

Developers are already contending with a 4 per cent surcharge in corporation tax and the imminent building safety levy—estimated to raise up to £3 billion. The government insists the new charge will speed up necessary repairs, but many property firms fear that further costs and regulations will slow construction at a time when the nation urgently needs more homes.

In its trading update on Friday, Berkeley voiced alarm at the “extent and pace of regulatory changes” in recent years. Citing the soon-to-be-introduced levy, the company said these “incremental” adjustments could undermine the delivery of new homes. That view is echoed by Jennie Daly, chief executive of Taylor Wimpey, who recently warned that yet another “costly requirement” will make it challenging to build quickly and at scale.

Founded in Surrey in 1976 by Tim Farrer and Tony Pidgley, Berkeley built 3,521 homes in its most recent financial year—mostly in and around London. Under chief executive Rob Perrins, it has also been moving further into the rental sector with plans to manage up to 4,000 homes.

Despite the looming cladding levy, Berkeley’s trading statement noted a “modest improvement in sales reservations” over winter, with wage growth, static house prices and improved mortgage deals all luring cautious buyers back to the market. The builder stressed that sustained confidence depends on the course of interest rate cuts and broader economic stability.

The company reconfirmed at least £975 million in pre-tax profit over the next two years, including £525 million in 2025—a rare show of optimism in a sector still grappling with multiple headwinds. Analysts welcomed this “short, reassuring update,” with Berkeley’s shares rising 1.4 per cent to £36.08, although they remain down by nearly 26 per cent year-on-year.

Shareholder returns also remain in focus, with the developer buying back £71.3 million of its own shares since December and preparing to return a further £156 million by September through additional buybacks or another dividend. The next dividend payout of £33 million is due at the end of this month.

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Extra cladding tax will jeopardise 1.5 million homes target, warns Berkeley Group

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