Michael Gove, the Improvements Secretary, is closing in on a multi-billion dollar deal with Britain’s biggest builders to help tackle the national cladding crisis exposed by the 2017 Grenfell Tower disaster.
Major companies including Barratt Developments and Persimmon are preparing for the imminent signing of a legally binding contract with the government that could end up costing the industry £5 billion or more, Sky News has learned.
One executive said they expected the final contract to be signed and presented next week, although they cautioned that the timeline remained fluid.
Last year, dozens of property developers signed a commitment to renovate buildings built since the early 1990s, with deals renegotiated with the government in recent weeks focused on the extent of the companies’ exposure.
The City watchdog is understood to have been involved in discussions with industry representatives over whether to sign off on the contract would require the approval of shareholders in listed companies such as Barratt, Persimmon and Taylor Wimpey.
Sources have put the cost of the new tax on residential property developers at up to £3bn, with the self-recovery bill at around £2bn.
A further tax on the industry could raise £3bn, industry chiefs have concluded, prompting some companies and investors to warn of the risk of capital flight from the sector.
Earlier this month, the Department for Upgrading, Housing and Communities said it was “finalizing the legally binding contracts developers will sign to repair their unsafe buildings and expects them to do so very soon.
“We will not accept a deviation from their obligations.
“Building owners have a responsibility to make sure all buildings are safe.”
The FTSE-100 housebuilders have already put significant financial reserves into their accounts to prepare for the signing of the final government contract.
On recent earnings calls with analysts, some indicated they expected a settlement to be imminent.
“By signing the commitment, we’re saying that we essentially had a commitment, that we wanted to sign a legal agreement,” Barratt chief executive David Thomas told analysts this month.
“There has been a process of discussion of the legal agreement that has been going on since last June, so we believe we are getting closer to the government publishing the legal agreement and we expect that in due course we will sign that.”
A spokesperson for the House Builders Federation (HBF) said: “The promise [signed last year] demonstrated the industry’s commitment to playing its part in ensuring that tenants do not have to pay for the work required to keep buildings safe.
“We have worked constructively with the government to ensure that the detailed contract reflects the commitments under the pledge and we await the final version.
“British builders are taking responsibility and have made good progress in restoring their own buildings and are already paying a further £3bn to fund work on buildings built by foreign companies and others.
“The government must now meet its commitment to secure the input of overseas builders and material suppliers who are at the heart of this problem, and avoid further targeting British builders for buildings built by others.”