Barratt Redrow hopes to defy housebuilding gloom by splashing cash
As some of London’s listed housebuilders take emergency measures to cut costs amid rising building costs and stagnant demand for homes, one firm is splashing the cash.
Barratt Redrow, which will announce its full-year numbers on Wednesday, defied the miserly approach taken by its rivals earlier this summer when it said it will buy back £400m in shares across the next year.
The FTSE 250 group said in July that its “performance and resulting balance sheet strength” meant that the sweeping buyback would be “the most effective way to create long-term shareholder value”.
This came following months of pressure from Phoenix Asset Management, its second-biggest shareholder, which published a 430-page report pushing for change.
The tome claimed that the higher mortgage rates, material cost inflation and subdued consumer demand caused by the Iran war meant that the best way to ensure valuable investor returns was to buy back swathes of shares at their current value.
‘It’s not easy being a housebuilder’
But the £400m commitment came at a time when other top housebuilders are cutting back on spending, both to shore up their balance sheets and to create a reserve of cash to splash out when market conditions improve.
Anthony Codling, an analyst at RBC Capital Markets, told Morning Wire that Barratt Redrow should “by all means slow down on land buying”, but urged the company not to spend the money.
“Keep the money there so that when things turn, you could invest in the business and buy land that would set you up for the next cycle,” he said.
Investors were “surprised” by the housebuilder’s decision to commit such a huge cash pile to the buyback, Codling said. He added that the scheme may “tie the hands” of Barratt Redrow’s incoming chief executive, Dean Banks, who takes charge later this month.
“I don’t think it’s unreasonable to wait for the new chief executive to get their feet under the table [and] get settled,” Codling added.
Banks, who has experience at construction firms including London-listed Balfour Beatty, is entering the housebuilding industry for the first time at a particularly choppy period in its history.
“It’s not that easy being a housebuilder in 2026,” said AJ Bell’s head of markets, Dan Coatsworth.
“Cue the tiniest of violins given the bumper returns these businesses have enjoyed for large parts of the last decade or so, but there’s no doubt that Barratt Redrow and its peers face a tough backdrop.”
Housebuilders look to Budget
Housebuilders are facing a squeeze from both ends. Rising energy and freight prices are pushing up their supply costs, while soaring mortgage rates are stifling demand.
Lenders have rushed to hike their borrowing rates since the Iran war broke out, lumping an extra £18,400 onto the deposit of the average UK homebuyer.
On top of these external pressures, housebuilders will be nervously awaiting next month’s Budget. The industry was sent into a spin earlier this summer when it was trailed that the government would scrap council tax and stamp duty, though Downing Street swiftly poured cold water on these rumours.
Last week, Berkeley became the latest top housebuilder to urge the government to cut stamp duty for first-time buyers in a bid to resuscitate demand for homes.
Analysts say Barratt Redrow has held up relatively well compared to its peers. Beleaguered housebuilder Crest Nicholson is still locked in emergency talks to seek softer terms from its lenders, while Vistry posted a £30m first-half loss in an unscheduled update in July.
Barratt Redrow will hope that it has pre-empted the share price slides which followed these rival announcements by trailing much of its full-year update in advance.
In a comprehensive trading statement in July, the housebuilder forecast that it will have built 17,667 homes in the year – on the upper end of market expectations – while it met forecasts with its £560m expected pre-tax profit.
The housebuilder’s extensive recent disclosures mean investors will be running a magnifying glass over its comments on its trading in recent weeks, likely to be sensitive to any signs that the Budget run-in is weighing on an already sluggish market.
Barratt Redrow did not respond to a request for comment.