Persimmon Homes is projected to incur up to £40 million annually due to increased budget tax rates and a newly implemented cladding levy, as highlighted by the CEO of one of the UK’s leading housebuilding firms.

Dean Finch expressed concern over a significant gap between the government’s demand for the construction of 300,000 new homes each year and its simultaneous imposition of escalating costs on the industry.

While Finch appreciated the reforms introduced to the National Planning Policy Framework, he emphasized that these initiatives are being undermined by rising financial burdens. He stated, “If you keep adding billions of costs, there is less money to buy land and build homes.”

Finch reiterated his strong support for the building safety levy established following the tragic Grenfell fire, which claimed 72 lives. This levy mandates developers to fund the rectification of cladding and fire safety issues in their own buildings. Notably, Persimmon has either completed or initiated remediation on 82% of its affected developments.

Nonetheless, he pointed out that this levy adds to the existing costs that developers must bear to repair their properties, along with the residential property developer tax—an additional 4% corporation tax on profits exceeding £25 million. He detailed, “We are getting hit three times over.”

Considering the additional fiscal pressures from the latest budget, Finch estimated that the national insurance hike combined with the cladding levy would raise his business’s costs by approximately £30 million to £40 million annually.

Calculating the impact of the cladding levy, he noted that it would amount to roughly £1,750 to £2,000 for each new home. If applied across the government’s annual goal of 300,000 new homes, this would result in a minimum industry expense of £525 million each year.

Finch remarked, “There are billions of extra costs coming down the line just at a time when the government expects us to increase the pace of home building.” He expressed concern for smaller builders, stating, “I don’t know how smaller housebuilders will be able to afford it.”

The government anticipates that the new cladding levy will generate approximately £3.4 billion over the next decade. Steve Turner, an executive director for the Home Builders Federation, noted that this figure would be in addition to around £6 billion the sector has already pledged to resolve cladding issues, including the tax surcharge. He criticized the government for targeting UK housebuilders rather than the manufacturers of defective cladding or foreign developers.

Turner further remarked that under the prior housing secretary Michael Gove, there were no financial contributions obtained from the companies responsible for providing the faulty cladding or from foreign developers that have operated in the UK.

He also indicated that he has yet to see any initiatives from the current Labour government aimed at holding these entities accountable.