The housing industry was surprised by news this month that housebuilders Barratt and Redrow are to merge in a £2.5 billion deal. We look at why they’ve merged and what will this mean for the industry as much as for house buyers? Find out more…
About the merger The UK’s largest housebuilder, Barratt Developments has agreed to buy their smaller counterpart Redrow in a deal with a value of around £2.5 billion. The new combined group will be named Barratt Redrow Plc, and the current Chair, Chief Executive, Chief Financial Officer, and Chief Operating Officer at Barratt will remain in their roles for the combined group. For Redrow, the current Chief Executive will become an executive director of the new combined group.
By buying Redrow, Barratt will be adding a third brand to their housebuilding group: Redrow Homes, to join Barratt Homes and David Wilson Homes.
Why has the merger happened?
The last few years have proved extremely difficult and testing for all housebuilders across the country. From Covid closures and subsequent material shortages to lack of skilled labour, the recent economic turmoil and planning consent being a constant headache, the obstacles have been many. They have also been costly, impacting on delivery as much as actual operating costs.
And last year’s financials prove it has been a tough year for both businesses. Barratt reported adjusted pre-tax profits of £157.1m for the six months to the end of December, close to 70% down on the year previously. And Redrow reported a similar fall in half-year pre-tax profits to £84m and nearly 58% lower than the year before.
It’s clear from this merger that both parties feel they will be stronger working together as a unit to build and deliver new homes. Initial reports show the two housebuilders will be looking at around £90m worth of annual cost savings by the time they get to three years into the takeover. But not just that, they will benefit from greater buying power across the whole country. The new combined group aims to deliver more than 22,000 homes a year in the medium term.
What difference will the merger make to home buyers?
The pledge from the Barratt Chief Executive when discussing the merger, mentions the bringing together of “two highly complementary companies, creating an exceptional homebuilder in terms of quality, service and sustainability, able to build more of the high-quality homes this country needs.”
There is confidence from both parties, this is something they can deliver by working together.
The merger will also bring more choice for home buyers when looking at one site or development. There will be a greater range of different properties available for sale on any one development – something which planning authorities currently demand. With Redrow on board, Barratt will be able to deliver the smaller, more affordable properties it has always built for first-time buyers and young families under the Barratt Homes brand. Then, they are able to deliver the larger family homes under the David Wilson Homes banner. And now, with Redrow Homes, they will be able to target wealthier buyers with the larger, luxury properties Redrow is renowned for.
What are the concerns in the housing industry?
Of course, mergers of this type are always met with an element of doubt, uncertainty and concern. The fact that Barratt is set to dominate the UK housebuilding market, becoming the UK’s biggest developer with its acquisition of Redrow, will certainly raise eyebrows. Fear may stem from the reduced competition the combined merger may bring, which in turn can lead to issues with house pricing, variety, and innovation. But overall, it is felt there is enough room for healthy competition to thrive despite this high-level merger.
Overall, the move sends a resounding message to politicians in the country that something needs to be done with the housebuilding crisis we have in this country. With figures for 2023 showing new home completions fell by 8% to 231,000, it’s clear more positive needs to be taken.
We have made the process of finding the ideal new-build home easy and stress-free. Whatever your buying circumstances, you can search for a variety of homes from different housebuilders by typing in the area you’d like to live near. You can do that here.
Alternatively, you can search by housebuilder. If you’d like to know more about the homes and developments available with Barratt Homes, take a look here. And for David Wilson Homes across the country, click here.
