Miller warns construction could be hit by tighter bank lending

Edinburgh-based Miller Group said it had seen an encouraging 13 per cent lift in sales so far this year. But chairman Sir Brian Stewart said the latest Bank of England figures showing mortgage lending at a nine-month low were "very disappointing".

Stewart said: "The market needs more certainty, politically, economically and financially. It would be unfortunate if, having been through the worst recession in our lifetime, the financial sector failed to provide the products, the liquidity and the conditions for the market to move forward."

Keith Miller, group chief executive, said mortgage availability remained the "fundamental, key issue for the housebuilding industry".

He said: "Mortgage availability has been improving but only relatively slowly. It's not just quite limited, but stringent in the way large deposits are being asked for that a lot of first-time buyers cannot afford."

Miller added that he believed the sector's "destiny" was dictated by the availability of mortgage funding. "I don't see a massive problem but it's right to flag up that if there's a further tightening it will immediately affect the housebuilding industry", he said.

It came as Miller Group revealed that 20m of asset writedowns, mainly in its overseas commercial property arm, and a 58m interest bill plunged it 72.4m into the red in 2009. This was down on the 170m loss in 2008.

On a divisional level, the company's housing arm saw losses come back to 20.2m from 125.3m. After the exceptional writedowns, the property division's losses widened to 7.2m from 600,000 last time.

The construction division made a record profit of 15.5m, up from 13.7m last time, with a strong increase in operating profit margins to 3.8 per cent (2.2 per cent) as it took on less work. Miller's group turnover for the year fell to 783m from 1.05bn.

Miller said such margins were among the best in the construction industry, but that they could be improved. "We believe we can take margins higher, but maybe not this year or 2011," he said.

The group's construction business is 80 per cent skewed to the public sector, but Miller said he did not fear being unduly hit by major fiscal retrenchment under any new government.

"There will be some cutbacks in the public sector, but I don't expect to see a massive amount in health, schools and Ministry of Defence, areas we are in," he said.

Miller added that the group had had talks with Lloyds Banking Group about any plans it might have for its 20 per cent stake in Miller, but that there was nothing definite as yet.