The UK’s biggest housebuilder has announced plans to cease building on new sites until the housing market improves, stoking fears of thousands of jobs cuts throughout the industry.
Persimmon Homes has reported a 24% fall in sales so far this year, citing “unprecedented tightening” in the mortgage market and low consumer confidence as the cause. The company revealed total sales revenue had fallen to £1.37 billion in 2008, down from £1.8 billion in same period last year.
The UK construction industry officially employs two million people, although the total figure is much more due to workers employed through the supply chain
and casual labour.
Redundancies have already been reported in Northern and Yorkshire regions, and more are expected as other large housebuilders follow Persimmon’s lead to stop building on new sites.
Some contractors are predicting the downturn could be worse than the slump in the early 1990s, when 500,000 construction workers were laid off.
Persimmon says it is encouraged by the government actions to increase liquidity in the banking system to kick start the mortgage market, but feels more needs to be done to help home purchasers, particularly first-time buyers.
In a statement at the AGM
in York yesterday, Persimmon group chief executive, Mike Farley said: “We believe the government should urgently consider additional action to benefit first time buyers by increasing the threshold for stamp duty
to support an improvement in activity and help those who are most in need of assistance.
“Further reductions in interest rates would also be helpful in supporting sentiment.”
Persimmon's share price fell by 6% to 595p yesterday, but opened at 610p today and had crept up to 620 at the time of writing.
“At some stage, in our view, housing market activity will improve given the underlying requirement for more housing and a ‘place to live’ in the UK,” Farely said at the AGM.
“Given our strong financial position and scale we remain confident in the medium and long term prospects for Persimmon.”
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
A property chain is a line of buyers and sellers (the “links”) who are all simultaneously involved in linked property transactions. When one transaction falls through – for instance, someone can’t get a mortgage or simply withdraws their property from sale, the entire chain breaks and all the transactions are held up or even fail entirely.
Every limited company must hold an annual general meeting for its shareholders once a year to consider the company’s accounts, reports of directors and auditors and it is the only opportunity for shareholders to express their feelings to the board of directors. Shareholders also vote on the appointment/re-appointment of directors, although this may be sent to shareholders as a postal ballot.