Persimmon, one of the UK’s largest housebuilders, has cut almost 300 jobs as weak demand linked to the fallout from the government’s autumn mini-budget sent half-year profits plunging by 65%.
The company said the reduction in headcount was due to efforts to cut £25m from annual costs in response to the downturn, as it decided not to replace workers who had quit their jobs or retired in the first half of the year. Persimmon had more than 5,860 employees as of December.
Persimmon has been grappling with a drop in the number of customers committed to buying homes after the market meltdown, which has pushed up interest rates and made mortgages more expensive for prospective homeowners.
The effect, which was compounded by the expiry of the government’s help-to-buy scheme, resulted in Persimmon building just 4,249 homes in the first half of 2023, marking a 36% drop compared with the same period last year.
The slump in demand filtered through to Persimmon’s profits, which fell almost two-thirds to £151m from £440m a year earlier.
Persimmon said it would continue its cost-cutting drive, but that it was ready to ramp up construction if demand rebounded. “We will continue to balance the need for cost savings with our aim of ensuring the company has the ability to respond quickly to an improvement in the market to achieve our objective of growing fastest in the industry – while delivering industry-leading margins – as market conditions improve,” the company said in a statement.
Persimmon’s workforce reductions follow similar moves by its fellow housebuilder Bellway, which revealed on Wednesday that it was cutting jobs and shutting two of its divisions amid fears that house completions would “decrease materially” over the next 12 months.
Housebuilders have been feeling the knock-on effects of 14 consecutive interest rate rises by the Bank of England, which raised the base rate to 5.25% last week as part of its efforts to lower inflation.
That has pushed up mortgage costs, with the average rate on new two-year fixed-rate deals now at 6.83%, while the typical rate on a new five-year fix is at 6.33%, according to Moneyfacts.
However, lenders including Halifax, TSB, Nationwide and HSBC have started to cut their mortgage rates in light of data indicating improved inflation, which could also soon lead to the Bank of England ending its rate-raising streak.
Persimmon shares rose 3.7% on Thursday morning, valuing the company at £3.7bn.
Investors appeared to be encouraged by comments from the chief executive, Dean Finch, who said the UK’s chronic home shortage would continue to propel the housing market.
“With the historic under-supply of homes, the longer-term outlook for housing remains positive,” Finch said. “Persimmon has a proven track record of delivering strong returns through the cycle. I am confident that the combination of a relentless focus on our key enduring strengths while enhancing key capabilities will again drive strong returns through the next cycle.”
He added that the housebuilder was still on track to meet profit forecasts for the full year and said Persimmon was “building a platform for future growth”.
