Housebuilder prepares to make job cuts as share price plummets

10:34am Tuesday 8th July 2008

A HOUSEBUILDER that lost its place in the FTSE 100 last month after its share price plummeted is expected to tell the City that it is cutting up to 1,000 jobs.

Persimmon, which owns Charles Church, is expected to announce the cuts when it updates the City today.

The York-based construction group is due to announce the outcome of a consultation with employees, which it launched at the end of May, and, according to some newspaper reports, it could cut up to one fifth of its 5,000 workforce.

In April, Persimmon said it had seen a 24 per cent drop in revenues this year, and said it was putting new projects on hold.

Shares closed at 228.00 last night, a major drop on the 12- month high of 915p.

It comes after Newcastlebased Barratt Developments last week said it was cutting 1,000 jobs, or 15 per cent of its workforce, as it closed six regional offices.

Construction company Galliford Try also cut 260 jobs and Taylor Wimpey has laid off 900 staff, meaning that more than 3,000 jobs will have been lost in the sector in a week if the Persimmon job losses are as big as expected.

Housebuilders have been hit by the credit crunch as the mortgage drought has meant homebuyers have been unable to secure the finance they need, while property price falls have put people off buying.

Barratt Developments is issuing a trading update on Thursday, in which it is expected to reveal a £100m writedown on the value of its land.

It is thought the fall in the value of its land will push it closer to breaching its banking covenants when it faces a covenant test in December.

The group is understood to have been locked in talks with its bankers for weeks in an attempt to find a way through the slowdown without breaching the terms of its £1.7bn debt, acquired when it bought Wilson Bowden.

It is reported to be close to striking a deal with its lenders to relax banking covenants on debt and gain an extra £400m to pay off a £600m short-term loan used in the Wilson Bowden deal.

It is also understood to be looking to sell its commercial property arm, Wilson Bowden Developments, for between £220m and £230m.

Last week, Taylor Wimpey said it had been unable to agree a refinancing arrangement and it has also written off £550m from the value of its UK landbanks and work in progress as the market falls.

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