News Archive
Mass redundancies as UK housebuilding plummets
Released on 04/07/2008
Announcements of 900 job cuts at Taylor Wimpey and closer to 1000 at Barratt conclude a rollercoaster week in the UK housebuilding industry as analysts forecast nothing but gloom on the horizon.
Britain’s construction industry came face to face with its biggest crisis in 11 years on Wednesday, July 2, after Taylor Wimpey failed to tie up a deal for new finance it had trailed on Monday.
Its share price fell by 52% on the news and it announced 900 job cuts. Two days later, there was more bad news when its banks demanded a quick sale of its Taylor Woodrow construction arm.
The company also announced the departure of finance director Peter Johnson and confirmed that it would close 13 of its 39 regional offices as a result of a “significant deterioration” in the market. It announced land writedowns of 11 per cent (£550m).
By Friday, Taylor Wimpey’s share price had fallen from 377p a year ago to 31p.
In a statement the housebuilder said: “Our major markets are experiencing a significant downturn, characterised by significantly lower weekly sales rates and lower average selling prices than in recent years. We expect that the UK housing market will remain weak at least through 2008 and we do not anticipate any recovery in the short-term.”
The statement further added: “We confirmed in our statement on June 30 that we were meeting with a number of existing and potential investors with a view to raising further equity capital. However, in light of current market conditions we have not been able to conclude a satisfactory transaction.”
Other housebuilders felt the pain. Shares in Redrow fell about 30%, in Barratt by as much as 25% and Persimmon 20% on the news.
Taylor Wimpey said sales were 45 per cent down on last year. It also said it was reducing selling prices to bring in cash.
On Thursday it was the turn of Barratt to react to the downturn by announcing that 15% of its 6500 workforce would go, around 975 people. The move involves closing two of its 32 divisions and merging eight others into four.
Barratt is struggling under £1.8bn of debt, which has seen its share price fall 84% in two months to 42p.
Later in the week, Barratt’s banks were pressing for a quick disposal of its Wilson Bowden Developments commercial property arm once the results of its land writedown are known. It is understood a deal is being lined up for the end of September.
Meanwhile, in a further blow to the sector, urban residential developer City Lofts was forced to place 250 unsold apartments into receivership this week, Building reported.
In the same week as the mass redundancies were announced, a report from the Royal Institute of Chartered Surveyors confirmed that construction workloads in Britain are declining at their fastest rate since the third quarter of 1995.
The decline breaks over 11 years of continued growth, according to the RICS’s UK Construction Market Survey, published on Wednesday July 2.
The report said that the biggest drops came in the private housing sector where rates declined faster than at any time in the survey’s history. The news made the Government’s target of building 3 million new homes by 2020 highly unlikely, according to Building Magazine.
David Stubbs, RICS senior economist, told Building: “This decline can be attributed to the lack of availability of debt finances and the fall in prices, which is taking its toll on developers.
“If this pattern continues then the industry will have to start making significant cut-backs. This downturn will also have a negative effect on housing targets, which will not be achieved at current levels of output.”
