A housing giant called “Labour’s favourite” builder risks being plunged into fresh financial trouble as the fallout from the Iran conflict intensifies.
With the spectre of an inflationary shock looming, Vistry Homes, which receives hundreds of millions of pounds a year in taxpayer-funded loans and grants, has warned that rising cost pressures could trigger a cash crunch.
Under what the listed developer calls a “severe but plausible downside scenario”, Vistry warned it could “exceed its committed borrowing facilities” and breach certain loan agreements.
It comes as the company battles concerns about its finances. Shares in Vistry have crashed by more than 50pc over the past month following the surprise departure of Greg Fitzgerald, the chief executive, compounded by concerns over a liquidity squeeze.
Vistry has announced plans to raise cash through a fire sale of some of its homes, following a string of profit warnings after bosses underestimated the cost of building houses in the south of England.
The company listed a range of “adverse but realistic stresses” that could lead to it struggling to meet its debt repayments, including a 5pc jump in construction costs from September.
Experts have warned that Middle East hostilities pose one of the biggest threats to the construction industry.
The war in Iran is expected to push up the cost of shipping, energy and raw materials in the coming months, weighing on housebuilding activity.
Vistry sounded the alarm over its finances in its annual report published late last month.
However, Vistry added that the challenges outlined “are not expected to arise concurrently”.
It also said that the “downside scenario” was designed to test the resilience of the Group’s financial position, “rather than to reflect a likely outcome”.
Other stresses that could weaken its financial position are a stagnating housing market, a 3pc reduction in prices, completion delays, and a spike in cancellations, Vistry said.
It comes as new data show more than half of Vistry’s payments to suppliers have been late.
Subcontractors were most likely to wait the longest to be paid by Countryside Properties, a division of Vistry, with 57pc of invoices paid late between July and December, according to data filed with the Government.
Countryside took 46 days on average to pay its suppliers, while Vistry took 41 days.
It follows reports that Vistry has been demanding deferrals and discounts from subcontractors in at least two regions: Essex and the South West.
Iain McIlwee, the chief executive of Finishes and Interiors Sector, the trade body for interior construction suppliers, said the scale of the problem was “concerning”.