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Barratt warns on cutbacks

The chief executive of Barratt has warned subcontractors that it will be putting the squeeze on suppliers for the next year at least.

Mark Clare said that the market had actually got worse in the last six weeks and admitted: “We are not planning on a recovery of the market this calendar year. In the next financial year we will continue to tough it out.”

The rate of cancellations - would-be buyers putting down a reservation fee for a house only to pull out later on - have increased since Easter, said Mr Clare. He added: “The big thing is to reduce build costs. That will be a feature going forward. We will get prices down by using new technologyand also straight negotiations.

“The number of subcontractors we use will reduce quite dramatically because of the slow work in progress.”

Mr Clare said buyers were finding it very difficult to get mortgages and were holding back because of market sentiment.

The spring selling season has seen a fall in reservations and the next key selling season starts in September. But Mr Clare said he wasn’t pinning any hopes on this traditionally good selling period, adding: “It will continue to bump along.”

He said that he was looking for smaller lenders to start advertising the mortgages they had on offer in order to win back market share from the High Street banks as a sign that the market was recovering.
But he added: “The lenders have pulled back again and at the moment first time buyers can’t get mortgages.”

The Midlands and West are the worst affected markets, while London and the South-east are proving more resilient. Some of the problems had been of the industry’s own making, he said, and singled out the number of one-bedroom flats that had not been sold.

He said: “There has been too much product and we will not go into inner-city rise other than in and around London.”

Barratt’s developments arm, which came with last year’s purchase of Wilson Bowden, is attracting interest from institutional investors.

Mr Clare said that the division, which employs 150 people, was not a core business.

It has a market value of around £200 million and its portfolio includes retail parks, office blocks and industrial units.