UKhomebuilder Bellway says Iran war and political uncertainty cloud outlook
Bellway Faces Market Challenges Amid Geopolitical and Economic Uncertainty
By Raechel Thankam Job
June 9 (Reuters) - British homebuilder Bellway warned on Tuesday that an increase in mortgage rates and rising energy costs , coupled with political uncertainty in the UK, have dampened demand and pushed up costs, clouding its outlook beyond July.
Impact of Middle East Conflict on Construction Costs
Soaring oil and energy prices due to the Middle East conflict have pushed up the cost of input materials such as bricks and tiles, forcing UK builders to review and renegotiate their supply chains - and dealing a blow to government hopes for a surge in home construction.
Government Housing Targets and Industry Response
The government has targeted 1.5 million new homes before the next election, due in 2029, yet others in the industry such as Vistry and Berkeley have already cut back on land acquisitions and slowed their pace of construction.
Smaller Builders Also Hit by Slowdown
Separately on Tuesday, smaller affordable housebuilder MJ Gleeson warned on profit after delaying a major land sale due to the construction slowdown.
Political Tensions and Market Volatility
POLITICAL TENSIONS
Bellway, which builds everything from social housing to luxury penthouses, said demand had moderated in April and May. It had already warned on its profit margin in March.
Labour Party Uncertainty and Market Impact
Political tensions within the ruling Labour Party, including mounting leadership uncertainty around Prime Minister Keir Starmer, have added volatility in UK markets.
Outlook and Analyst Commentary
"The outlook beyond the current financial year remains uncertain, reflecting ongoing geopolitical tensions in the Middle East and a less predictable domestic political environment," CEO Jason Honeyman said in a statement.
Bellway’s Share Performance and Forecasts
Shares in Bellway, which have lost over 35% of their value this past year, hit their lowest since October 2022, before recovering to trade 3% higher at 0905 GMT as the company maintained its annual profit and volume forecasts for the year ending July.
Future Guidance and Analyst Insights
Bellway did not provide any outlook for fiscal 2027.
"Given the sector and macro (economic) trends I think holding volume in FY27 at this stage would be a decent outcome and it would not be a surprise to see a margin squeeze of about 100-150 basis points to consensus profit expectations for FY27," Investec analyst Aynsley Lammin said.
(Reporting by Raechel Thankam Job in Bengaluru; Editing by Subhranshu Sahu and David Holmes)
