IN Brief:
- The developer’s pre-tax loss increased from £10.2m to £12.7m.
- Building-safety approval delays have affected project timing and cash flow.
- Longer pre-construction periods are increasing finance and holding costs across residential development.
London Square has reported a pre-tax loss of £12.7m as building-safety approval delays continued to affect the cost, timing, and progression of residential developments.
The result widened from the previous year’s £10.2m loss, with the developer identifying regulatory delays as one of the pressures extending project programmes and postponing the point at which schemes can begin construction or generate revenue.
Gateway approvals for higher-risk buildings require developers and project teams to demonstrate compliance with building regulations before construction begins. Coordinated information must address structure, fire safety, building services, competence, construction control, and management of the golden thread.
When an approval date moves, the effect extends beyond the construction start. Land, design teams, planning obligations, finance facilities, surveys, insurance, and pre-construction resources continue to generate costs while the project remains unable to progress.
Residential development is particularly exposed because income is concentrated around sales, handover, or occupation. Capital can remain tied up for prolonged periods before a scheme reaches the stage at which value is realised and reinvested.
Building-safety approval is arriving alongside already difficult market conditions. Higher borrowing costs, subdued transaction volumes, construction inflation, affordable-housing obligations, and planning delays have reduced the contingency available to absorb further programme movement.
As the Building Safety Regulator processes a substantial volume of applications, project teams are also adapting to a regime that requires much greater design resolution before site work begins. Information that was once developed during construction or delegated to specialist subcontractors must now be coordinated earlier.
Under previous delivery models, enabling activity might begin while façade details, fire-stopping interfaces, structural connections, or mechanical and electrical packages remained under development. Gateway 2 requires the building-regulations case to be substantially resolved before work starts on a higher-risk building.
Developers are consequently carrying more design expenditure at risk and involving principal contractors, specialist designers, and key suppliers earlier. Better coordination can reduce unsafe late changes, although it also increases the capital committed before regulatory approval has been secured.
Approval risk now sits alongside planning and funding within the core development appraisal. A project may have planning permission, an agreed contractor, and advanced sales assumptions but still lack a reliable construction start date.
That uncertainty affects finance drawdowns, labour planning, subcontractor quotations, supply-chain reservations, and revenue forecasts. If approval dates change repeatedly, prices may expire and personnel assigned during pre-construction may be moved to other projects.
Further pressure is developing through the building-safety levy, which adds another consideration to residential appraisals already operating with limited headroom. Although the levy and gateway process address different elements of the safety programme, both affect the economics of new development.
Contractors face a related resource problem because they may need to retain pre-construction teams while an application is considered, without being able to mobilise the site workforce or convert the scheme into recognised construction revenue.
Extended approval periods can also weaken supply-chain certainty. Specialist contractors asked to develop design information may be unable to hold labour, factory capacity, or material prices indefinitely, particularly when several projects are awaiting decisions simultaneously.
Increasing regulatory staffing should improve capacity, but application quality will remain central to throughput. Coordinated construction-ready information, clear design responsibility, controlled product selection, and robust change procedures reduce the volume of clarification required during assessment.
Incomplete submissions create additional work for both applicant and regulator, while repeated requests for information make it harder to distinguish schemes requiring limited correction from those needing substantial redesign.
Developers are therefore treating building-safety approval as a defined programme rather than a single milestone immediately before construction. Information schedules, assurance reviews, design freezes, and contingency periods need to be established early enough to influence procurement and financing.
Where several projects encounter delay at once, the financial effect can spread across an entire development business through reduced starts, slower revenue recognition, and restricted recycling of capital. Companies with greater balance-sheet capacity can carry that pressure longer, but the cost remains material.
London Square’s results arise from its own project mix and commercial position, although the underlying constraints extend across the higher-risk residential market. More predictable gateway decisions will require both sufficient regulatory capacity and applications developed to the standard expected under the new regime.
