In the past month, building companies have issued a flood of redundancy announcements, as the credit crunch and banks' reluctance to lend played havoc with house sales
Sales of newly built houses have "fallen off a cliff" in the last few weeks, putting tens of thousands of jobs at risk across the economy, according to the chairman of the Home Builders Federation (HBF).
The past month has seen a litany of profits warnings and redundancy announcements from building firms as the credit crunch, and banks' reluctance to lend, played havoc with the peak spring selling season.
The problems are escalating rapidly, despite measures from the Bank of England to improve banks' access to funds, and the knock-on effects on the wider economy will be even worse, says Stewart Baseley, from the HBF. "The slowdown last autumn was minuscule compared to what we are seeing now — since the start of April the market has fallen off a cliff and trade has almost stopped," he said. "The implications for the economy are dire. Tens of thousands of jobs are at risk, possibly even more, as the potentially massive lay-offs amongst homebuilders start to filter through."
Unless mortgage-lending picks up in the very near future, the situation will snowball, jeopardising the long-term capacity of the industry — and with it the Government's target for three million new homes by 2020.
"The Bank's £50bn special liquidity scheme is having precious little impact and the danger is that by the time anyone wakes up in six months, it will be too late and there won't be an industry there to respond," Mr Baseley said. "It takes a lot longer to put things back together again than it does to dismantle it so if the industry restructures itself to build far fewer homes then it won't have the infrastructure of people and skills to put its foot back on the accelerator again in the future."
But there is little sign of any respite for homebuilders, with the Council of Mortgage Lenders warning yesterday that it now expects house prices to fall by 7 per cent during 2008. The group had previously forecast a 1 per cent increase over the course of this year.
Howard Archer, the chief UK and European economist at Global Insight, said: "The bad news on the housing market is pretty relentless at the moment, with the low level of mortgage activity being a consequence of a damaging mix of stretched buyer affordability and very tight lending conditions."
Wolseley, the building supplies group, became the latest casualty yesterday. Pre-tax profits have fallen by 30 per cent in the last nine months, and 325 jobs have already been axed in North America, with more to go in both the US and Europe by the end of July.
Taylor Wimpey, the UK's biggest homebuilder, said this week that it is closing 13 offices and cutting staff numbers by around 600, more than 10 per cent of the workforce. The company made a pre-tax loss of £19.5m last year due to the writedown of assets in the US and Spain, compared with £406m of profits in 2006, and has already laid off some 40 per cent of its US staff.
Persimmon has put all its new developments on hold as sales of new homes, already down 24 per cent so far this year, slowed even further.
Bovis Homes' profits warning early this month blamed a 30 per cent drop in sales, and said it had received just 80 res-ervations since March. And Redrow has already laid off 200 people, about 15 per cent of its staff. It is expecting to sell 20 per cent fewer properties this year than last and reservations were down by a whopping 50 per cent this spring.