Bellway to cut staff numbers in anticipation of property market slowdown
Housebuilder Bellway is to close two of its divisions and reduce activity in a third after interest rates and borrowing costs led to a drop in reservations and completions and an increase in cancellations.
The company told shareholders this morning that it expects sale completions to “decrease materially” over the next 12 months due to weaker order numbers and “low reservation rates”.
It comes after 14 consecutive increases in interest rates, which have risen to a 15-year high of 5.25% and pushed mortgage costs higher for homeowners.
The Newcastle-based firm, which has sites across Scotland, has decided to close its South Midlands and London Partnerships divisions, and reduce production in its Durham business. The sites in those divisions will be transferred to other businesses.
Bellway will also reduce its 3,000-strong workforce and began consulting on the job cuts on Monday. A spokesperson declined to specify how many jobs would go, but said it would be a “very small percentage overall”.
“Given the weaker trading backdrop and uncertain economic outlook, we continue to focus on maintaining Bellway’s balance sheet resilience and we will maintain a highly disciplined approach to production expenditure in the year ahead,” Bellway said.
“Following a review of overheads, we are also taking steps to reduce headcount across the group.
“Importantly, to protect the long-term health of the business, these changes will not compromise the group’s ability to return to growth when trading conditions improve.”
Bellway said it had delivered a robust performance, but the recent increase in mortgage rates through June and July has resulted in a “weaker trading environment”. It said: “In the current financial year, given the level of the order book and prevailing low reservation rates, legal completions are expected to decrease materially.”
The overall reservation rate was 28.4% lower than the prior year at an average of 156 per week, against 218. Completions reduced by 2.3% to 10,945, although this was just short of its guidance of 11,000.
Jason Honeyman, group chief executive of Bellway, said: “Bellway has delivered a resilient performance, with volume output and housing revenue in line with expectations and supported by the strength of our order book at the start of the 2023 financial year.
“In a challenging operating environment, the result has also been achieved through the dedication of our colleagues, subcontractors, advisers, and supply chain partners.
“The backdrop of macroeconomic uncertainty and cost of living pressures affected consumer demand during the year and, given affordability remains constrained by higher mortgage interest rates, underlying trading conditions are likely to remain challenging in the near term. To help mitigate this, and notwithstanding ongoing delays in the planning system, the depth of our land bank provides scope to deliver outlet growth in the current financial year and beyond.”
He added: “Bellway’s operational strength and experienced teams will enable the group to successfully navigate changing market conditions and, supported by a strong balance sheet, it is well placed to continue to deliver high-quality homes to our customers and returns for shareholders.”