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Booming Britain? Not so fast, says Kingfisher CEO

Wednesday, 11 Sep 2013 | 4:52 AM ET
Sentiment in the UK has begun to shift: Kingfisher CEO
Wednesday, 11 Sep 2013 | 2:15 AM ET
Ian Cheshire, CEO of Kingfisher, tells CNBC that there's a shift in sentiment on the UK economy which is usually the first step in the direction of a recovery.

The U.K. economy might appear to be back on track, given the uptick in Britain's housing marking activity, but the recovery needs to be built on solid ground, the CEO of home improvement retailer Kingfisher told CNBC on Wednesday.

Ian Cheshire, who heads up the company which owns B&Q and ScrewFix, warned that it was "a bit early to call a boom," despite seeing early signs of economic recovery in Britain.

"We want to see export-led, investment-led and skills-led growth, but consumption is such a critical part of the economy, you've got to have that as a motor as well," Cheshire told CNBC Europe's "Squawk Box" on Wednesday. "We might be getting a bit ahead of ourselves, but we are seeing a shift in sentiment and that's the first step towards something else."

(Read more: UK house prices leap to record high)

He added: "The forward indicators in the U.K. are clearly looking better now… It's just a question of how soon this shows up in what goes through the tills -- the only metric that matters."

Kingfisher reported first-half adjusted pre-tax profit of £365 million on Wednesday, which met analyst expectations. The earnings were boosted by a recovery in the U.K. housing sector with government programs like the "Funding for Lending" and "Help to Buy" schemes encouraging banks to approve mortgages for first-time home buyers.

(Read more: UK housing recovery spurs 'bubble' warnings)

"In the U.K. you can point to a fundamental shift in lending conditions and activity which is beginning to feed out. The issue for us is that 6-9 month lag from housing market activity to an uptick in our business," Cheshire remarked. "However, we have to begin to assume that there is almost a self-fulfilling loop going on here and the mood music and media is definitely more positive and people are just more positive."

Cheshire welcomed a pick-up in mortgage approvals, which hit their highest level since March 2008 in July, but highlighted that they remained well below half of what they were pre-economic crisis.

(Read More: UK u-turn: yet another growth forecast upgrade)

His comments come against a backdrop of improving economic data in the U.K., with business confidence and activity rising. The housing market in particular has benefited from the nascent recovery, with house prices rising by 5.4 percent in the year to August, according to the Halifax's latest house price survey. The rise has not come without widespread warnings of another housing bubble forming, however.

(Read more: Reasons not to celebrate UK recovery yet)

Homebuilders such as Barratt Developments, which reported on Wednesday that group revenues were up 12.2 percent for the full year to £2.6 billion, are the winners of this housing sector growth, and Kingfisher's CEO said that his company too was ready to capitalize on improving conditions.

"We would expect to see a benefit from the 'Help to Buy' scheme as it goes into existing households in the early part of next year," Cheshire said. "We are in a position to respond to that demand and we're certainly planning for flexibility so we can make the most of those opportunities."

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt

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