UK Competition Watchdog Probes Major Housebuilders Over Market Concerns

The UK's Competition & Markets Authority (CMA) has initiated a significant investigation targeting eight prominent housebuilders, citing deep-seated worries about the state of the British housebuilding sector. A comprehensive report, which is the culmination of a year-long analysis, indicates a variety of issues are causing the industry to continually underdeliver on new home construction.

Insufficient Home Construction

According to the CMA, the number of newly built homes in Great Britain has failed to meet the necessary benchmarks. With only about 250,000 homes built last year across England, Scotland, and Wales, the figures fall substantially short of England’s targeted goal of 300,000. A speculative private development model, characterized by builders constructing homes without pre-securing buyers, accounts for roughly 60% of the houses constructed in 2021 and 2022. Although this model offers market flexibility, it also contributes to the widening gap between market deliveries and community housing demands.

Companies Under Scrutiny

The housebuilders in the crosshairs of the CMA’s investigation include Barratt Developments PLC, Bellway PLC, Berkeley Group Holdings PLC, Bloor Homes, Persimmon PLC, Redrow PLC, Taylor Wimpey PLC, and Vistry Group PLC. CMA Chief Executive Sarah Cardell states that while the actions of these firms may not be the primary cause of the industry's issues, any anti-competitive behavior must be addressed.

Additional CMA Concerns

Beyond the underdelivery of homes, the CMA has expressed unease over estate management charges and the overall quality of some newly built housing. The Authority believes significant intervention is necessary to enhance home quality. The regulator is opening a separate inquiry into suspected sharing of commercially sensitive information amongst builders, potentially affecting both construction rates and home pricing.

A problematic planning system generating inconsistent outcomes and a long-drawn-out process is part of the issue, says the CMA. Many planning departments suffer from being underfunded and lack current local plans. The absence of explicit targets or substantial incentives to address housing needs in their regions exacerbates the problem, compounded by extensive consultations and sometimes late feedback from various stakeholders.

Recommended Reforms

The CMA suggests numerous reforms to encourage higher housing numbers, improvements in new-build quality, and better consumer protection regarding private public amenity maintenance in new estates. Recommendations include councils being required to adopt amenities in new housing estates, enhanced protections for current privately managed estate homeowners, and the prompt establishment of a new homes ombudsman. The introduction of a mandatory single consumer code could help homeowners hold builders accountable for any quality concerns.

In response to the CMA's actions, shares in the implicated housebuilders dropped significantly on Monday morning. This response underscores the market's sensitivity to regulatory scrutiny and the potential consequences for the sector.

CMA, housebuilding, investigation