Housebuilding stock continues to fall in anticipation of Persimmon redundancies

Housebuilder Persimmon is expected to announce 1,000 job losses tomorrow in its trading statement which is expected to be gloomy.

Mike Farley, the group’s chief executive, is expected to announce he has been forced to cut a fifth of the 5,000-strong workforce.

In addition, analysts believe the company will be forced to write-off between £200 and £300 million from the value of its landbank.

Last week, Merrill Lynch and RBS both downgraded the sector after Taylor Wimpey failed to secure £500 million from shareholders in a bid to shore up its balance sheet.

The entire housebuilding sector has been suffering of late due to the credit crunch and housing slowdown.

Last week, Barratts announced plans to reduce its headcount by 1,000 as it battles with the property slowdown.

Last month, Merrill Lynch warned that the housing market could face a repeat of the 1990s crash. It said there is growing evidence of consumers behaving in a manner similar to that seen in the early 1990s, in that concerns over job security and falling house prices are leading to a reluctance to make a house purchase.

RBS said a severe volume and price correction now looks likely for UK house builders. It is recommending clients sell shares in Persimmon, Taylor Wimpey and Barratt.

Merrill Lynch reduced its price targets on Persimmon from 400p to 215p, Barratt to 27p, Bellway to 360p, Berkeley to 700p, Bovis to 300p, Redrow to 110p and Taylor Wimpey to 35p.

The housing slowdown is not just affecting the housebuilding industry. Related industries such as materials suppliers and removal men are suffering.

So far, Wolseley Plc, the world’s biggest distributor of plumbing and heating equipment, has shed 400 jobs in the UK.

Finally, estate agencies are closing branches at the rate of 150 a week.

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