Vistry warns of extra costs and supply chain hit due to tax changes in Budget

Housebuilder Vistry has warned of extra costs and a hit to its supply chain because of tax changes from last week’s Budget, while also warning of higher inflation next year.

The company said it is “assessing the impact” of Labour’s autumn Budget, where Chancellor Rachel Reeves raised employer national insurance contributions, among other tax measures.

Vistry said the increase would cost it about £5 million next year, “with the rate increase also impacting our supply chain”.

It added on Friday: “Having seen a year of neutral build cost inflation in FY24 (financial year 2024), the group is expecting to see some overall pressure on build costs in FY25.

“We will look to mitigate these where possible through our benefits of scale and visibility of revenues, and through efficiency gains.”

It comes after a swathe of listed companies warned of the impact of higher employer costs being passed on to consumers, something which the Bank of England said on Thursday could fan inflation.

The Bank also said that the Budget would likely cause the headline rate of UK inflation to stay higher for longer, while also cutting the base interest rate for the second time this year.

Vistry, which mainly builds affordable housing, was upbeat on the prospects of meeting Labour’s policy challenge of building an extra 1.5 million homes over the next five years.

It said: “The scale of the need for additional affordable housing across the country is undisputed, and the Government is committed to a sharp increase in the delivery of affordable housing over the next five years.”

“Vistry remains uniquely positioned and committed to playing a key role in supporting the Government to deliver its plans.”

“In anticipation of a new Affordable Homes Programme in 2025, partners are increasingly motivated to engage in discussions on future pipelines in response to the Government’s target for 1.5 million new homes.”

The housebuilder reported an uptick in sales rates and consumer interest on the open market after the general election, and the Bank’s interest rate cut in autumn also helped boost confidence.

It saw a quieter market for partner-funded projects during September and October, as companies held off on spending decisions ahead of the Budget and waited for further cuts to interest rates.

Meanwhile, it reported “strong demand” from the private rented sector, with pricing on rental sector homes remaining “competitive”.