The house builder Persimmon has announced it will be cutting almost 2,000 jobs – more than 30 per cent of its workforce – as the credit crunch causes a lack of mortgage availability and
Sales at Persimmon were down 31 per cent in the first six months of the year, and house prices fell by an average of five per cent. It's profit margin fall from more than 20 per cent to 14 per cent.
The company sold 5,501 homes in the first half of the year, a 31 per cent decline in business, with an average selling price of £181.500, compared to £189,225 a year ago.
Industry experts are blaming the fall in house prices, soaring mortgage
rates and consumer confidence. The Council of Mortgage Lenders (CML
) has indicated that house prices will continue to fall.
Despite the job cuts, however, Persimmon has not suffered to the same degree as its rivals Taylor Wimpey and Barratt which have both experienced significant writedowns. While cutting back its workforce will cost an initial £12million, it will result in annual savings of £45million.
The builder also has debts of £900million, but this remains safely within its banking facilities of £1.39billion. Chief executive of Persimmon, Mike Farley, said that the rapidity of deterioration in the market took the industry by surprise, and that this is the toughest housing market the country has seen for 30 years.
He expects house prices to fall a further five per cent by the end of the year and for the market to continue falling for another 12 to 18 months.
The downturn in the housing market is casting doubt on the Government's plan to reach its goal of 240,000 new homes a year. Persimmon is proceeding cautiously with new projects, shelving many new developments. It is expected to complete 11,000 homes this year, down from 16,000 in 2007.
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