Tuesday lunchtime business bulletin

Jul 8 2008 By The Journal

Housebuilding giant Persimmon today said it had laid off more than a fifth of its workforce since January as it faced up to the toughest conditions in the group’s recent history.

The firm said the number of house sales had slumped by 31% to 5,501 in the first six months of the year, leaving sales revenues down by more than a third at £1bn.

Persimmon confirmed that a total of 1,100 jobs will have been cut so far this year under an overhaul to save around £45m a year.

The York-based group, which trades as Charles Church, Persimmon Homes and Westbury Partnerships, said it hoped the measures were enough to see it through the housing market turmoil.

It now employs around 3,900 staff after the job cuts, with 32 offices across the UK. The company has shut three offices since January, but said today it did not plan to close any more as it seeks to retain a national presence.

The FTSE 100 Index was a sea of red today after falling more than 2% amid further signs of economic gloom.

Shares tumbled early on after a sharp overnight fall on Wall Street infected stocks in London, and remained depressed thanks to more housing market woes and fears in the financial sector.

By mid-morning the Footsie was 130.7 points lower at 5382, in bear market territory.

Speculation that two mortgage providers might have to raise fresh capital and make further writedowns triggered the sell off in the United States.

London’s banking stocks were sharply lower in the wake of the rout, with Royal Bank of Scotland leading the sector’s fallers. Shares in the bank, which was downgraded by Cazenove yesterday, fell another 8.8p to 192.2p. Lloyds TSB was 11.75p down at 284.75p.

Bradford & Bingley continued to cause concern, with shares down another 19%, or 7.25p to 34.75p, as one analyst suggested the stock was now effectively worthless.

Homewares retailer Dunelm stressed its resilience in a downturn today, despite posting its first quarterly sales dip for nearly two years.

The chain, which has 89 stores and is focused on the value end of its market, said like-for-like sales fell 2.4% during the three months to June 28. It is the group’s first decline following seven consecutive quarters of sales growth.

Chief executive Will Adderley, the son of the firm’s founders Bill and Jean, said: ``Whilst many home-related retailers are feeling an impact from negative macro-economic factors, Dunelm is more resilient than most."

The company recently said average spend per transaction was ``relatively low" at under £30, with customers able to trade up or down in its stores.

The like-for-like performance in the final quarter of its financial year, covering the period to June 28, was measured against a particularly strong sales period last year, the group said.

Up to 25 billion barrels of oil and gas could be recovered from the North Sea and other parts of the UK coast, but the Government will have to work closely with the industry to unlock remaining reserves, a new report said today.

Oil & Gas UK, which represents the offshore industry, said extra investment and exploration would be needed to recover all the fuel.

Firms planned to invest £21bn in the next five years, targeting around 2.7 billion barrels, but there was substantially more left to recover.

Malcolm Webb, Oil & Gas UK’s chief executive, said: ``There is little doubt that the need to maximise recovery of the UK’s remaining oil and gas reserves is a matter of national importance and one that is well understood by Government at the highest level.

``The UK’s oil and gas basin contains up to 25 billion barrels of oil and gas that we could ultimately recover. Plans currently in place should reach about 10 billion of those barrels so the challenge in the hands of the Government and industry is how to achieve the remaining 15 billion barrels."

The pound at noon was US$1.9737 compared to US$1.9695 at the previous close while the euro at noon was £0.7956 compared to £0.7944 at the previous close.