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Bonfire of the building jobs
Jonathan Prynn, Consumer Affairs Editor9 Jul 2008
Two more leading housebuilders announced job losses today - taking the total to 5,000 in a week.
Bovis and Redrow said up to 40 per cent of their workers, a combined total of 1,000, would have to go as they cut costs due to the paralysis in the property market.
Today's losses follow the announcement of 2,000 redundancies yesterday at Persimmon. Barratt Developments and Taylor Wimpey last week revealed around 2,000 job losses between them.
It will fuel fears that the credit crunch is starting to feed through to the employment market because of the dramatic fall in the number of houses being sold.
Bovis, which is also slashing its dividend by three quarters, said it was having to cope with "the worst market backdrop that the group has seen for many years".
Sales of new homes were down 35 per cent in the first half of the year.
The Bank of England's interest rate setting committee meets today amid heightening alarm about the economy's apparent slide towards recession.
Despite a barrage of bad news over recent weeks, including today's new record low for consumer confidence, the Bank's monetary policy committee is expected to leave its base rate at five per cent.
The committee, chaired by Bank of England Governor Mervyn King, is worried about rising inflation caused by soaring oil and food prices and is likely to leave rates unchanged until towards the end of the year.
However, the decision will dismay businesses and homeowners struggling to cope with the effects of the credit crunch. The latest survey of families confidence in the state of their finances showed it fell to a new low in June.
Nationwide Building Society said its consumer confidence index dropped to 61 last month - down from 65 in May and 93 a year ago.
Fionnuala Earley, Nationwide's chief economist, said: "This month's drop in confidence is to be expected, given the recent run of bad news.
"With reports of rising inflation rates, weaker economic growth and further house price falls, it is not surprising people are feeling much less optimistic.
"While consumers appear to be fairly relaxed about the availability of jobs, with unemployment beginning to rise, we are likely to see a change in labour market sentiment in the coming months."
There are now growing fears that the economy is on the brink of its first recession - defined as two consecutive quarters of negative growth - since the early Nineties.
Yesterday the British Chambers of Commerce warned that recession could arrive by the autumn and said unemployment, which has so far stayed at historically low levels, could rise by as much as 300,000 by the end of next year.
That would deal another major blow to the already faltering property market with homeowners losing their jobs unable to keep up with mortgage payments. Repossessions are forecast to rise to 45,000 this year, the highest level for 16 years.
City economist George Buckley of Deutsche Bank said he expected the economy to effectively flat-line in the second half of this year with only feeble growth next.
However, Alistair Darling is sticking by his official Treasury forecasts of 1.75 per cent to
2.25 per cent growth this year, followed by 2.25 to 2.75 per cent growth next year. These forecasts are almost certain to be downgraded by the Chancellor's autumn pre-Budget report. Since the last recession ended in 1991 the British economy has enjoyed its longest continuous period of economic growth on record.
Reader views (1)
Why aren't they building prisons? We seem to have an endless supply of inmates both foreign and home-grown with which to fill them if the Govt reneges and decides burglary is a crime after all. Criminality seems to be the one growth industry in this country.
- Squiz, Islington, 09/07/2008 13:28
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