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UK Housebuilders Shed Jobs Amid Slowdown

CNBC.com
Wednesday, 9 Jul 2008 | 7:45 AM ET

Two more UK homebuilders announced job cuts on Wednesday as housing woes deepened and with the industry warning the job losses in the sector could climb steeply.

AP

Bovis Homes and Redrow said they were cutting 40 percent of their workforces, following recent announcements by rivals Persimmon, Barratt Developments and Taylor Wimpey of more than 3,000 job cuts collectively.

Trade association Home Builders' Federation recently warned that job losses would likely reach into the tens of thousands as the downturn worsened at unprecedented speed, Reuters reported.

Housebuilders' share prices have collapsed more than 90 percent since the beginning of this year, partly on fears of big writedowns on land bought at the peak of the housing market.

The downturn in the UK housing sector has gathered pace with ongoing declines in home sales, house prices and new construction orders, as mortgage availability dried up.

"The UK housing market continues to be severely affected by the credit squeeze. Homebuyer confidence is now also being influenced by concerns about the future for house prices and interest rates," Redrow said in a statement.

The whole sector was dealt a huge blow early last week after Taylor Wimpey failed to secure fresh equity funding to shore up its balance sheet and said it would be writing down a total of 660 million pounds ($1.3 billion) on the value of its land bank and work in progress.

The company, like Bovis, also said it would be cutting its dividend.

Thus far, Persimmon and Bovis have reassured the market they expect no more writedowns.

Eyes will be on Barratt Developments as it will issue its full-year pre-close trading statement Thursday and reveal whether it has been able to negotiate a refinancing package with its bankers.

The British government has pledged to look at ways of supporting the troubled housing market.

Shares of Barratt were up more than 26 percent, Taylor Wimpey rose by 12.5 percent, Redrow increased by 7.5 percent, Persimmon was up 8.7 percent and Bovis Homes was up by 3.3 percent in London trade, rising with the market.