Housebuilder acts to cut costs and blames shortages of mortgages for paralysing market

Neil Fitzsimmons, chief executive of Redrow, has said the housebuilder has cut its workforce by 15% as a result of the credit crunch.

Speaking after the company’s profit warning on Tuesday, Fitzsimmons said it had also put a freeze on recruitment.

Last June Redrow had 1,372 employees, which means more than 200 jobs have since been cut.

Although Fitzsimmons did not reveal which sites had closed as a result of the cuts, he confirmed that the Exeter office had shut after a merger with the Bristol operation.

In the trading update Redrow said housing reservations were half the level of last year, after a sharp downturn since February.

A company statement said: “The trading environment has deteriorated to an even greater extent than we anticipated at the time of our interim results.”

The warning followed recent figures from the Home Builders Federation that revealed a 66% fall in reservation levels at the end of April.

Fitzsimmons said the key to solving the problem was mortgages. He said: “The desire to buy is there but life is difficult for the first-time buyers that oil the wheels of the market.”

He denied that the company had pulled out of the land market as a result of the downturn. “To say that would be an overstatement. What we are doing is taking a very cautious view.”

And he refused to reveal what institutional investor Toscafund was planning to do with the 17% stake it had built in the company over the past two months. “That’s between us and them,” he said.

Meanwhile, Galliford Try was forced to issue a profit warning after a “further sharp deterioration in recent weeks” in its housing division. Despite a strong performance in the construction arm, it said pre-tax profit for the year ended 30 June 2008 would be “no less than £60m”, which is £16m below consensus forecasts.

Redrow in numbers

26.5% The year-on-year drop in its order book
3,800 Estimated completions in 2008 – down 21% on the 4,823 finished in 2007
20% The cancellation rate that has “experienced a marked increase since Easter”
£480m The debt facility Redrow says it is operating “well within”