Tuesday morning business bulletin
Jul 8 2008 By The Journal
Embattled housebuilder Persimmon today announced it was axing 1,100 jobs as it battles against plunging house sales and property values.
Persimmon, one of the UK's biggest housebuilders, said half-year sales revenues were down by more than a third at #1 billion.
The 1,100 job cuts come as part of an overhaul to save money amid the housing market woes.
Persimmon said: ``We have reappraised our business in the light of the significant change in trading conditions and have taken action to address the new challenges presented.
``We now have a lower level of overheads and structure appropriate for the current levels of business, whilst at the same time remaining well placed to achieve an increase in output whenever mortgage availability and the overall market improves."
The group’s job losses add to nearly 2,000 job cuts announced last week by rival firms Taylor Wimpey and Barratt Developments.
Housebuilders have been hit hard 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 a home.
Meanwhile, upmarket property group Savills today reported a 45% drop in London sales and said the market downturn had begun to impact on prime country properties.
The FTSE 100 Index tumbled more than 2% today after a sharp overnight fall on Wall Street infected stocks in London.
Speculation that two mortgage providers might have to raise fresh capital and make further writedowns triggered the sell off in the United States.
With London investors also facing more economic and house market gloom, the FTSE 100 Index fell 143.7 points to 5369 in the first hour of trading.
Banking stocks were sharply lower in light of the rout for financial stocks in New York. Royal Bank of Scotland, which was downgraded by Cazenove yesterday, fell another 8.7 points to 192.3p, while Lloyds TSB eased 11.25p to 284.25p.
Bradford & Bingley continued to cause concern, with shares down another 19%, or 7.5p to 34.5p, as analysts suggested the stock was now worthless.
Alliance & Leicester was down 8%, or 21.5p to 227p, after Panmure Gordon said it now expected the bank to report losses in both 2008 and 2009.
Chancellor Alistair Darling faces an EU deadline today to cut Britain’s budget deficit.
EU finance ministers are due to set a formal timetable following a Commission warning last month that the Treasury is breaching Europe’s economic stability rules.
The Commission invoked ``excessive deficit procedure" and now wants ministers to set a deadline of the 2009/10 financial year for the UK ``to correct its budget deficit, which is expected to exceed 3% of GDP in the present financial year."
Brussels is pressing the Government to cut its borrowing or its spending, or both, to keep the UK budget inside the 3% deficit ceiling set by the EU’s Stability and Growth pact.
Under the pact, countries consistently falling outside the limit can face hefty fines - but only if they are part of the eurozone.
That means in the UK’s case that no penalty can be imposed, but the Government is obliged to report his budget projections to Brussels and face the formality of a public rap on the knuckles when there are breaches.
The pound at 9am was US$1.9749 compared to US$1.9695 at the previous close while the euro at 9am was £0.7957 compared to £0.7944 at the previous close.
