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The marketCEOYour browser does not support the element. reaction has been unsparing. When Vistry, one of Britain’s biggest housebuilders, issued its second profit warning in a month on November 8th, its shares plunged again. The firm’s market capitalisation has fallen by about £2.4bn ($3.1bn), or around half its value, from its peak in September. Vistry, which was formerly known as Bovis Homes, is blaming bad management and a poor culture at a single legacy division for most of the £165m-worth of unexpected cost overruns. But its travails have cast a shadow not just on the construction industry’s star performer but also on the housebuilding ambitions of the new Labour government.Until recently Vistry had been on a tear. Bold changes to its strategy, to bulk-sell the homes it builds to social-housing providers and rental investors such as Blackstone, a private-equity giant, had sent its shares up by more than 90% over the past year. Its £1.25bn takeover of Countryside, an affordable-housing provider, in 2022, coupled with pledges to build 18,000 homes this year (up from just over 16,000 in 2023), made it a firm favourite of Labour politicians. Greg Fitzgerald, Vistry’s boss, is described as “exceptional” by several insiders. “The day he was appointed to Bovis, then a bit of a basket case, I turned it into a ‘buy’,” says Alastair Stewart, an analyst now at Progressive Equity Research.Mr Fitzgerald has personally bought £200,000 of stock since October 8th as a show of confidence in the business. The firm describes the problems in its division in the south of England as “very fixable”.There is still a lot to like about its strategy. Although Vistry’s emphasis on affordable homes means lower prices than other sorts of development, and fewer benefits from house-price appreciation, high shares of pre-sold housing—only around a third of its sales take place in the open market—make the company less vulnerable to volatility. Despite budget constraints at housing associations and local authorities, affordable housing is badly needed.But Vistry’s recent woes raise questions about how it is run. Lots of change can often lead to missteps, and even industry allies concede that Mr Fitzgerald is prone to being a hard taskmaster. His role as both and chairman concerns some. That flouts governance guidance set out by the Financial Reporting Council, a regulator, and is a rarity in corporate Britain.Although Vistry’s overruns appear to have had specific causes, the problem of rising cost pressures is industry-wide. The official construction output price index is up by a quarter since 2019. Building a typical three-bedroom home costs around £242,000, more than four-fifths of the average house price in Britain.Pre-fabrication and other modern methods of construction allow housebuilders to save on labour and energy costs. But a combination of materials-price increases, higher taxes on employers following Rachel Reeves’s budget on October 30th and escalating building-safety costs—to remove and replace unsafe cladding, for example—will undermine efforts to build more homes. Higher borrowing costs in the wake of may also soften demand.Vistry now says it will build 17,500 homes this year, 500 fewer than originally expected. Its peers are also under strain. Crest Nicholson put out its fourth profit warning in a year in June, blaming a combination of high mortgage rates and rising costs. Persimmon has issued bleak warnings about building costs, too. The government says it wants to boost housebuilding by loosening planning rules, a laudable aim. But making it easier to get planning permission is just one part of the solution. Firms will put up only as many homes as they can sell at attractive margins.
