Persimmon Homes suspends new building

25 April 2008
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.”

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