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UK housebuilder Barratt Developments has signalled improvement in trading at the beginning of the year but highlighted the need for “continued momentum” over the coming months to overcome recent “challenging” conditions.

“Whilst we have seen some early signs of improvement in current trading during January, we will need to see continued momentum over the coming months before we can be confident that these challenging trading conditions are easing,” the UK’s biggest housebuilder said on Wednesday.

Barratt Developments recorded “a modest uplift” in reservations at the start of this year, thanks to expectations of monetary easing and cooling energy prices, but cautioned on its “uncertain” outlook for 2023.

The January performance comes after Barratt’s private reservation rate for homes in the six months to December 31 fell 44.3 per cent compared with the same period in the previous year. Revenue rose to £2.8bn from £2.3bn in the second half of the previous year.

“The economic backdrop has clearly been challenging and consumer confidence weakened significantly,” said chief executive David Thomas in Wednesday’s statement.

Thomas said that “political and economic uncertainty” and “rapid and significant” changes in mortgage rates had damped homebuyer confidence and reduced the affordability of homes.

The group said that the benefit of underlying house price inflation was “largely offset” by rising building costs. This combined with the fact that it completed most of its homes in London resulted in a 170 basis-point decrease in its adjusted gross margin to 23.

Barratt Developments, which built a total of 8,626 total homes in the half year, said that it expects to complete 16,500 to 17,000 homes in 2023.

The group’s shares rose 1.6 per cent in early London trading on Wednesday. They have dropped more than 25 per cent over the past 12 months.