Hundreds of jobs look set to be lost in the Midlands after Britain’s biggest housebuilder Taylor Wimpey failed to secure the half a billion pounds of funding it said it needed to fend off the problems of the declining sector.
To bolster its rapidly declining business and offset a catastrophic market downturn, the company announced it would be axing 900 jobs and closing a third of its UK regional offices.
It is understood the group’s redundancies – which comprise more than 10 per cent of the UK workforce – will be complete by the end of September this year. The job and office cuts will save the group £45 million a year.
Within the Midlands, the company has offices in Cannock, Wolverhampton, Leicester, Solihull and Warwick.
A spokesman for the firm declined to name which offices would fall victim to the cutbacks, however, it is thought that the company’s former Bryant offices in Wolverhampton and Leicester could be likely targets.
The company said it had already begun the statutory 90-day consultation period with staff and it would be doing all it could to minimise job losses.
Shares in the company went into freefall following a trading update stating that it had failed to secure the £500 million it needed.
At one stage more than half its market value was wiped out before a late rally saw shares finish down almost 42 per cent. Rivals Barratt Developments and Persimmon were also hit, with shares down almost 30 per cent and 18 per cent respectively.
The grim situation has also cost finance director Peter Johnson his job, as the company announced he would be stepping down at the end of the year.
Taylor Wimpey said housing completions were down 33 per cent during the first six months of this year with reservations faring worse, down 45 per cent.
The firm said: “We expect that the UK housing market will remain weak at least through 2008 and we do not anticipate any recovery in the short-term.”
UK housebuilders have been badly hit by the credit crunch, which has sent mortgage approval levels plunging to historic lows, hitting the housing market.
To further offset problems, it announced a £550 million landbank and work-in-progress writedown – 11 per cent of its UK portfolio.
It said it remained “in full compliance” with its banking covenants, but warned that without an amendment “in certain negative market scenarios we might breach one or more banking covenants at the first testing date in 2009”.
“We decided it would be prudent to agree a revised banking facility with our core lending banks conditional on raising further equity,” it went on.
Referring to the capital raising attempts, the firm added: “In light of current market conditions we have not been able to conclude a satisfactory transaction.”
Analysts reacted badly to the news. In a note that pulled no punches, broker Panmure Gordon said: “The Taylor Wimpey trading statement is significantly worse than our expectations from a trading, fundraising and financial perspective.
“The group is working hard to mitigate the current declines in demand but the housing market is very weak and is unlikely to improve over the next 18 months.”
Analyst Mark Hughes added: “This company could find itself in a lot worse financial position over the next 24 months compared to the position it already finds itself in.”