BARRATT Developments’ shares dipped after a trading update that showed it missed its target for new homes.

The firm, which says it is Britain’s largest housebuilder, told the City build cost increases have escalated to between nine and ten per cent in recent months, up from an average of around 6% over the year to June 30.

Home completions returned to pre-pandemic levels, with 17,908 recorded over the year, against 17,243 the previous year.

However, it was short of the target it flagged in February when it said it was “on track to deliver total home completions of 18,000 to 18,250”.

One analyst said the company is among others “running just to stand still” as costs continue to rise amid the deepening cost of living crisis.

The group said the surge reflects “the impacts of escalating energy costs and fuel cost inflation in relation to transportation”.

READ MORE: Barratt bids to build 2,300 new homes in Scotland this year

It recently announced a £1,000 bonus for 6,000 staff below senior management level as it looks to help workers during the crisis.

The payment will be spread over six months, with the first being made in July.

It comes on top of a move announced earlier this year to bring forward a 5% pay rise from July to April to help staff with soaring costs.

Despite the inflation pressures, the group said full-year underlying profits for the year to June 30 will be slightly better than expected as its house completions returned at a slower than expected rate but still reaching levels seen before the coronavirus pandemic struck.

The group now expects pre-tax profits of between £1.05 billion and £1.06bn for the year to June 30, which is slightly ahead of forecasts for £1.048bn and up from £919.7m the previous year.

Average private selling prices rose to £341,000 from £325,500 the previous year and the group said it saw annual house price inflation of around 8% on private reservations.

READ MORE: Barratt: Costs increasing amid shortages

The company said as it plans to migrate more of its production to timber frame that it will open a new factory in England to complement its existing factory in Scotland.

However, it acknowledged clouds on the horizon for the year ahead.

“Looking forward, we recognise that significant macroeconomic uncertainties remain, most notably around rising inflation and interest rates and their consequent impacts on UK economic growth, employment, as well as consumer confidence and spending,” it said.

It still expects to grow house sales by between 3% and 5% in the year to next June, assuming no major supply chain disruption or worsening of market conditions.

David Thomas, Barratt Developments chief executive, said: “While there are clearly macroeconomic uncertainties ahead, the housing market remains robust, our forward order book is strong and we have the resilience and flexibility to react to changes in the operating environment.

“Our focus remains on addressing the UK’s housing shortage with the high-quality, energy-efficient, sustainable homes and developments which we pride ourselves on building.”

Matt Britzman, equity analyst at Hargreaves Lansdown, said: “Completions were slightly lower than expected but came in ahead of pre-pandemic levels. More crucially though, demand looks to be holding up in the forward order book despite rising house prices.”

Danni Hewson, financial analyst at AJ Bell, said: “Build cost inflation of 6% in the year just gone is burdensome enough but a potential double digit increase in the current financial year would really challenge Barratt’s ability to protect margins.” She said that “like its peers, Barratt is running just to stand still in terms of profitability".

Barratt shares closed down 6.8p, or 1.5%, at 458.4p.