Brexit blamed as developers' profits crash

The developers behind the City of London’s Cheesegrater and Walkie Talkie buildings have said uncertainty caused by the UK’s decision to leave the EU over the summer helped send half year results at both firms crashing into the red.

Yesterday British Land, the firm behind Rogers Stirk Harbour & Partners’ Cheesegrater, slid to a pre-tax loss of £205 million in its half year to the end of September, compared with a pre-tax profit of £823 million for the same period last year.

The firm also posted a drop of 3.6% in total revenue to £297 million. But underlying profit was up 15% to £206 million.

The company said that since the EU referendum it had conducted a review of its development pipeline and capital expenditure plans.

The firm said Brexit had hit commercial property prices and its chief executive Chris Grigg said: “We’ve delivered a good set of results with a significant increase in underlying profits reflecting our actions and continued leasing momentum. We’re mindful of future uncertainty but are confident that our secure income streams and strong finances will ensure our business remains resilient.”

A day before, Land Securities, which was the developer on Rafael Vinoly’s Walkie Talkie tower at Fenchurch Street, said Brexit had hit the firm’s numbers with the developer racking up a £95 million pre-tax loss in the six months to September from a £708 million pre-tax profit in the first half of last year.

The firm said the decision to leave the EU has wiped £259.6 million off the value of its £14.4 billion portfolio and was having a “tangible effect” on commercial office property with occupiers being hesitant and supply increasing causing the amount of vacant office space to rise.

Land Securities added that it expected consumer spending to be affected by growing prices outstripping pay and subsequently increased pressure on retailers, which in turn would make it harder for the firm to grow rents.

But the developer posted a 1.6% increase in revenue to £376 million while analysts were cheered that underlying profits went up 4.5% to £192.5 million.

Meanwhile, Barratt has warned that the London luxury residential market is “challenging” and said it was dropping prices on some of its high-end developments.

In a trading update, the house builder said: “Market conditions in London at higher selling prices remain more challenging. To mitigate these risks we have taken pricing action on a number of our sites in London.”

It also added that it has offloaded a complete block in the capital – a scheme of 39 apartments – for £47 million.

Barratt said sales rates in London were softer compared to last year but added that the rates were outperforming those from 2015 for its Northern and Central regions.

Chief executive David Thomas said: “We are mindful of the potential for economic uncertainty created by the outcome of the EU Referendum. However, market fundamentals are robust.”