British housebuilders set to axe jobs

Housebuilder Persimmon is expected to announce it is cutting up to 1,000 jobs when it updates the City this week, it was reported today.

Housebuilder Persimmon is expected to announce it is cutting up to 1,000 jobs when it updates the City this week, it was reported today.

The construction group is set to announce the outcome of a consultation with employees, which it launched at the end of May, when it gives a trading update on Tuesday.

It is thought the the group could axe up to one fifth of its 5,000 strong workforce, according to The Observer.

The cull would add to the growing gloom for the housebuilder sector, after Barratt Developments last week said it was slashing 1,000 jobs, or 15% of its workforce, as it closed six regional offices.

Construction company Galliford Try also axed 260 jobs and Taylor Wimpey has laid off 900 staff, meaning that more than 3,000 jobs will have been lost in the sector in a week if the Persimmon cull is as big as expected.

Housebuilders have been hit hard by the credit crunch as the mortgage drought has meant homebuyers have been unable to secure the finance they need, while property price falls have put people off buying a home.

In April, Persimmon, which owns Charles Church, said it had seen a 24% drop in revenues so far this year, adding that it was putting new projects on hold.

The group also lost its place in the FTSE 100 Index last month after its share price plummeted. Shares closed at 229p on Friday, well down on the 12-month high of 915p.

The gloom is likely to continue with Barratt Developments, which is issuing a trading update on Thursday, expected to reveal a £100 million writedown on the value of its land, according to the Sunday Telegraph.

It is thought the fall in the value of its land will push it closer to breaching its banking covenants when it next faces a covenant test in December.

The group is understood to have been locked in talks with its bankers for weeks in a bid to find a way through the current slowdown without breaching the terms of its £1.7 billion debt, acquired when it bought Wilson Bowden.

It is reported to be close to striking a deal with its lenders to relax banking covenants on debt and gain an extra £400 million to pay off a £600 million short-term loan used in the Wilson Bowden deal.

It is also understood to be looking to sell its commercial property arm Wilson Bowden Developments for between £220 million and £230 million.

Last week Taylor Wimpey said it had been unable to agree a refinancing arrangement with its banks so far, and it has also written off £550 million from the value of its UK landbanks and work in progress as the market falls.

Meanwhile it was reported that co-founder of Berkeley Group Tony Pidgley and three directors are set to pocket a £60 million share payout.

Mr Pidgley is said to be in line to receive £31 million worth of shares, while finance director Rob Perrins will get £12 million, with directors Tony Carey and Greg Fry getting £9 million and £6 million respectively, according to the Sunday Times.

The payout is part of an agreement made with investors four years ago under which directors would be awarded 15% of the company if 1,200p per share was returned to shareholders.

Berkeley shareholders have already been given 900p but agreed to delay the final payment so that the housebuilder could take advantage of cheap land prices.

They agreed to fast-track the directors’ payouts, but have cut the original bonus.

No-one from Berkeley could be contacted to comment.

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