The Secret Behind Barratt's Success

In the interim management statement released earlier this month by Barratt Developments, group chief executive Mark Clare announced that the firm "is delivering a significant improvement in operating performance". This is despite the challenging environment for UK house builders at present...

In the interim management statement released earlier this month by Barratt Developments, group chief executive Mark Clare announced that the firm "is delivering a significant improvement in operating performance". This is despite the challenging environment for UK house builders at present, with the most recent construction market survey from the Royal Institution of Chartered Surveyors (RICS) describing activity in the sector as "broadly flat" during the third quarter of 2011.

Respondents to the RICS survey cited a lack of confidence in the industry, the economic difficulties and cuts to government funding for housing projects as some of the main factors holding the sector back. So, what has Barratt Developments done to put it in such a favourable position? According to Mr Clare, it comes down to the firm's focus on value.

He stated that it is "our strategy of pursuing value rather than volume combined with bringing recently-acquired higher-margin land into production" which has made the difference to the company's performance. He added: "The location of our new sites coupled with our highest quality housing is helping drive pricing and some recovery in sales rates." Mr Clare did, however, note that a lack of mortgage availability for potential buyers is restricting any recovery in the sector at present.

Spokesman for the Home Builders Federation (HBF) Steve Turner suggested that successful residential construction firms "have scaled their business to suit new demand". He stressed that the number of new houses being delivered in the UK is still well below the amount required to meet demand, commenting that the sector will be able to deliver more homes if issues such as the lack of land suitable for development and constrained mortgage availability are addressed. Mr Turner welcomed moves by the government to stimulate the sector. He cited the Get Britain Building Fund as one initiative that could be "very beneficial" by helping stalled sites get back to work.
 

- Friday 02 December 2011

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