Brickmaker to cut jobs amid ‘significant uncertainty’ in demand as interest rates rise

Brickmaker Forterra has announced plans to consult staff on redundancies after its May decision to mothball its Howley Park factory in the face of falling demand from housebuilders.

The firm said the moves to cut £13m of costs were in response to “challenging market conditions” and came as the hoped-for spring market resurgence had not proved as strong as at first anticipated.

Government figures show that demand for bricks is 31% down on the level seen a year ago, and Forterra said in its trading update for the half year to the end of June that “demand for our products for the rest of the year remains subject to significant uncertainty with rising interest rates widely expected to adversely impact the demand for new homes for the foreseeable future.”

forterra bricks

Forterra’s announcement came as average interest rates rose above the level seen in the immediate aftermath of the mini-Budget crisis for the first time, with an average two-year fixed-rate deal topping 6.65%, the peak from October last year.

Forterra said it expected to report half-year revenues of £183m, 18% down on the same period last year, with pre-tax profit of around £18m, less than half the £37.3m reported in 2022.

The firm said that in addition to its previous announcement that it would mothball production at Howley Park, designed to save £10m per year, “we are consulting with affected individuals on a restructuring of our commercial and support functions, aligning them to anticipated demand, which we expect to save approximately £3m annually”.

The statement did not say how many staff would be affected.

Forterra said in its statement that it had been expecting a slow start to 2020 with a “meaningful recovery” strengthening into the second half of the year. However, recent increases in interest rates and the bleak economic outlook meant it was “now assuming only a modest improvement in trading conditions, and therefore expect to deliver full year EBITDA with a more balanced H1/H2 split”.

It added that greater levels of borrowing, plus inventory build-up and rising interest rates, were also expected to “drive an increase in our financing costs”.

Forterra has been contacted to provide further details on the redundancy consultation.