Barratt to axe 1,000 jobs as crisis bites

Jul 4 2008 by Graeme King, The Journal

THE crisis in the housebuilding industry saw Barratt announce around 1,000 jobs losses yesterday, with 50 set to go at the company’s Newcastle office.

The deep cuts – more than one in seven of the company’s 6,700 UK workforce -– have been announced in the wake of all the company’s main rivals also making cutbacks.

On Wednesday, the country’s biggest housebuilder Taylor Wimpey said it was cutting 900 jobs from its 4,700-strong workforce. And Persimmon from York is also considering redundancies from its North East workforce, as part of nationwide cutbacks.

Barratt said yesterday it had entered consultation with its employees over the cutbacks among the group’s 6,700 staff in an overhaul of the business which will see offices in Chester and Sheffield closed.

A Barratt spokesman said: “Our number one priority is to ensure that Barratt’s core skills are retained.

“As you would expect, we need to manage our overheads to reflect market conditions.

“We will look at this on an office by office basis. The total number of redundancies is in line with the other major housebuilders.”

Barratt has been under pressure since the takeover of rival Wilson Bowden last year at the top of the market.

The firm’s share price has since slumped and it has been relegated from the FTSE 100 Index, and it is currently burdened with around £1.7bn in debt from the acquisition.

The group is also set to merge eight of its offices into four under the reorganisation plans, which will leave it with 26 regional offices.

The Barratt and David Wilson Homes offices in Leeds and Southampton will be merged, while Aberdeen-based Barratt North Scotland will be combined with Barratt’s Edinburgh office.

And Barratt’s East Midlands office will be merged with the David Wilson Homes’ North Midlands office in Nottingham.

The housing market has been hit as banks stricken by the credit crunch cut back on mortgage lending to would-be buyers.

The darkening outlook for the economy has also impacted sales in the crucial spring selling season, putting the finances of the UK’s biggest housebuilders under severe strain.

Analysis: Takeover leaves housebuilder in massive debt

JUST 16 months ago, newly-appointed Barratt chief executive Mark Clare was toasting a deal which made his company the biggest housebuilder in Britain.

The former boss at British Gas owner Centrica may have had little experience of the housebuilding industry before joining Barratt in late 2006, but the £2.2bn purchase of rival Wilson Bowden looked a sure bet. After all, how could you back a loser in Britain’s booming property market? It was the first time Barratt had attempted a takeover in more than 20 years. The move also catapulted Barratt into the prestigious FTSE 100 index of leading companies. At the time, chairman Charles Toner, who is no longer with the company, said: "This is a move that will deliver value and is an exceptional opportunity for shareholders in both companies."

Today, it is looking exceptional for other reasons after a year in which £4bn has been wiped off the company’s valuation.

The business, no longer officially based in the North East after Mr Clare moved the HQ to London, is teetering on the brink.

It is especially vulnerable since the Wilson Bowden deal was financed primarily through debt while the huge landbank, which had made the company such an attractive takeover target, now looks like a massive drain on resources.