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Barratt rules out further big job cuts

Barratt Developments chief executive Mark Clare has ruled out further large scale job losses after boosting sales volumes.

After shrinking the business in July – a process that involved 1,200 job losses – Barratt embarked on a sales push that included price deals.

The house builder has seen average sales in the past 10 weeks grow 18 per cent on the previous 10 weeks.

Sales for the 19 weeks to 9 November averaged 197 a week, down 23 per cent on the previous year. But since the beginning of September, sales have averaged 233 a week, down 6.6 per cent on the same period last year.

Mr Clare told Construction News: “The reductions we took in July were a big step down, but in the first 19 weeks we have hit targets for the resized business.

“As we run down sales on our sites and head towards site closures there will be some local loss of jobs. But we are talking small numbers.”

Mr Clare said falling house prices will have a negative impact on Barratt’s margins and will lead to further landbank write downs.

The company, which has already written down the value of its land by £208.4 million, said the housing market remained “extremely challenging” with confidence low, credit limited and prices continuing to be driven downwards.

Mr Clare said the average selling price of homes is expected to fall 15 to 20 per cent from the peak of the market in July 2007 to the end of this year.

He said Barratt will review the value of its land before the end of the year and update the market in February.

Mr Clare said: “Our margins are under pressure as selling prices have gone under what we expected.

“It is anticipated that further writedowns to land and work in progress will be required.”

Imran Akram, construction analyst at Collins Stewart, expressed concern about the update, especially the predicted fall in average house prices.

He said: “These price declines are greater than expected. They confirm rumours that Barratt has been in the vanguard of cutting prices and chasing volume, since it was the first house builder to renegotiate covenants.

“Pressure is growing on the group’s competitors, which are now obliged to chase volumes by cutting prices.

“Barratt may find it more difficult in future to maintain volumes.”