Higher than expected costs to remove cladding from Taylor Wimpey’s buildings in response to the Grenfell fire tragedy have wiped out its profits, the housebuilder has said.
The company made a loss in the first half of this year after putting aside an extra £222m to fix fire safety defects in homes it has built.
Taylor Wimpey’s share price sank early on Wednesday as it also revealed a slow down in sales, with first-time buyers struggling to get on the housing ladder.
The Labour government has made boosting housebuilding a priority, though analysts say private firms are less likely to build due to higher interest rates.
Jennie Daly, Taylor Wimpey chief executive, said that affordability remained “constrained, particularly amongst first-time buyers”, but that banks and building societies were still “committed” to lending for mortgages because of demand.
The firm said its UK sales rate for July had fallen compared to the same period last year, while the average sales price for its UK homes had dropped to £313,000 from £317,000.
First-time buyers have struggled to get a foot on the housing ladder since interest rates began rising in 2022, with the average borrowing term for first-time buyers rising to 31 years as they try to keep monthly repayments as low as possible.
As well as a drop in sale prices, Taylor Wimpey also recorded £92m pre-tax loss for the first six months of the year largely due to “exceptional charges” from cladding fixes.
In 2022, large housebuilders agreed to pay to fix cladding problems on homes they had built following pressure from the government and campaigners in the wake of Grenfell.
The fire in the west London tower block killed 72 people in 2017. As part of a refurbishment, combustible cladding and insulation had been fitted on the outside of the building, and in less than 20 minutes the fire climbed 19 storeys to the top of the tower, fuelled by the flammable materials.
An inquiry found all their deaths were avoidable.
Taylor Wimpey, who did not fit the cladding on Grenfell, said “defects” which were not visible before it started fixing some of its buildings with cladding on had pushed up its costs, along with increased construction costs and new fire engineer assessments.
The firm has now put aside £435m in total for cladding remediation work after the £222m rise.