Barratt Developments has suffered a 75% drop in annual profit and a double-digit decline in home completions after a “challenging” year for Britain’s biggest housebuilder.

The company said the past year had proved tough for the housebuilding industry and potential buyers, as cost of living pressures, much higher mortgage rates and weak consumer confidence weighed on the housing market.

Those factors hit Barratt’s annual pre-tax profits, which tumbled 75% to £171m in the year to the end of June, down from £705m a year earlier.

Barratt said it had completed 14,004 new homes over the period. While that was at the upper end of the company’s expectations, it marked an 18.6% fall on a year earlier, when it completed more than 17,200 homes.

It also warned that the figure was likely to drop further, to between 13,000 and 13,500 homes over the next full financial year. Barratt’s London-listed shares fell 1.7% on Wednesday morning.

The company tried to inject some optimism into the gloomy results, suggesting the Labour government’s planning reforms could boost activity across the industry.

Ministers have pledged to reintroduce mandatory housing targets, and take swift action to clear bureaucratic backlogs to boost housebuilding, as part of a wider overhaul.

“While the housing market remains subdued due to affordability constraints, we welcome the government’s proposed reforms of the planning system as key to both unlocking economic growth and tackling the chronic undersupply of new homes,” Barratt said.

“Underlying demand in the UK is strong and we look forward to working with government and wider stakeholders to deliver the new homes, of all tenures, the country needs”

Barratt also vowed to press on with its £2.5bn takeover of rival Redrow, despite concerns from the Competition and Markets Authority (CMA), which found that the merger could disadvantage homebuyers in the area around a town in Shropshire. CMA rules mean that the full operational integration of both businesses cannot start until the watchdog’s conditions are met.

Barratt said on Wednesday it was “working constructively with the CMA to obtain competition clearance. Although the macro backdrop remains challenging, particularly demand sensitivity to current mortgage pricing and a lack of higher loan to value mortgage availability, we have a strong balance sheet with significant net cash and a solid forward sales position,” the company said, adding that it helped it enter the new year “with confidence”.