UK builders point to recovery as demand for new homes rises

British homebuilders Persimmon and Vistry said on Thursday interest in new homes had picked up since coronavirus restrictions on the housing market eased in mid-May, propping up order books for this year with supporting prices for buyers.

Persimmon’s revenue dropped 32% to 1.19 billion pounds ($1.5 billion) for the six months ended June 30, and Vistry’s revenue from housebuilding activities slumped 59.7% to 344 million pounds as the UK housing market ground to a halt.

Both said construction and sales activity had picked up in the past six weeks, however, and Vistry said it expected a stamp duty exemption announced by the government this week would support buyers in the months ahead.

Shares in the two builders gained 5% and 2% respectively, building on a rally in the previous session in response to the government’s stimulus plans.

Britain’s housing market, crucial to a credit-fuelled boom in domestic demand stretching back two decades, had already been shaken by Brexit worries about the economy before the launch of widespread lockdowns in March.

Data this week showed prices fell for a fourth straight month in June as COVID-19 restrictions continued to depress the market, the longest run of monthly declines since 2010. Prime Minister Boris Johnson’s government, however, laid out a wide-ranging programme on Wednesday of support aimed at fending off job losses and a deep recession in the second half of the year that might trigger a deeper house-price plunge.

Persimmon, the UK’s second-largest homebuilder, said the value of its forward sales of new homes as at June end was 15% ahead of last year at 1.86 billion pounds and that pricing was “resilient”.

Housing reservations at Vistry were also up to 1.66 billion pounds at the end of June from the 1.5 billion pounds on May 20.

Meanwhile, British recruiter PageGroup said on Thursday it hoped a coronavirus-driven slump in hiring activity would soon taper off after it cut more staff in May and June to help it survive the industry’s biggest crisis in a decade.

The company, which owns brands such as Page Executive and Michael Page, reported a 48% decline in net fee income to 118.3 million pounds ($149.53 million) for the second quarter as companies put hiring on ice during lockdowns. Smaller peer Robert Walters also reported a drop in income, falling by one-third to 71.1 million pounds in the second quarter and added it was performing in line with market forecasts for the year.

Shares in PageGroup and Robert Walters were up 0.7% and 4.8% respectively.

The recruitment firms, which have already scrapped dividends and cut costs, also reduced the number of consultants they employ in response to the downturn.

PageGroup has laid off a further 326 employees in the last two months, adding to the 255 it announced in April, while Robert Walters said headcount at the end of the quarter had dropped 5% from the end of March.

“Having weathered a particularly challenging Q2, we now look forward to driving improved activity and gross profit through the second half,” said PageGroup CEO Steve Ingham.

Most global recruiters have been battening down the hatches for months in expectation of a collapse in revenue due to the crisis, analysts and industry players have warned steeper staffing cuts looked unavoidable.

A “jobs crisis” is underway in Britain, according to a survey from the Recruitment and Employment Confederation industry body on Wednesday, adding the collapse in the labour market had eased only slightly in June.

The recruiters’ quarterly trading updates also showed a marked slowdown in UK performance, with Robert Walters adding that London was performing worse than other UK regions.

PageGroup and Robert Walters both have operations in more than 30 countries globally.

Seperately, Sterling edged up 0.4% on Thursday against the dollar as investors delayed responding to Finance Minister Rishi Sunak’s announcement of plans to revive the economy, while Brexit risks continued to weigh on the British currency.

Sunak promised an additional 30 billion pounds ($38 billion) on Wednesday to help the coronavirus-hit economy. He announced bonuses to get furloughed staff back to work, cut value-added tax for the hospitality sector and temporarily scrapped a property tax on purchases of homes costing up to 500,000 pounds.

Investors barely reacted to the news immediately after the announcement, and sterling was steady on Wednesday a day after hitting three-week highs against both the dollar and euro.

Reuters