Housebuilding – The BarrattRedrow Deal and what it means for the sector

Chris Jones, Principal, Industrial and Transportation, discusses how The BarrattRedrow merger aims to create the UK’s largest housebuilder, potentially impacting market dominance, housing supply, and geographic expansion.

Housebuilding – The BarrattRedrow Deal and what it means for the sector

The recent announcement of Barratt Development’s proposed takeover of Redrow Homes in a £2.5bn merger deal came as a surprise to many but the new company BarrattRedrow insists it will become the UK’s biggest housebuilder and “accelerate the delivery of homes this country needs”. Whilst mergers in the sector are not uncommon, Vistry completed the £1.2bn takeover of Countryside in 2022, this one has grouped the biggest, with the seventh biggest creating a huge player in the market. Amid all the noise around competition, the deal does nothing to lessen the current furore around price fixing claims amongst the ‘cartel’ of leading housebuilders. The merger is driven not only by a desire for growth but also because the increase in interest rates has for the first time in a long time made the purchase of a new build property a more daunting and expensive prospect. Coupled with a long winded and some might say broken planning process which a larger entity will find easier to navigate, this might be the start of more consolidation among housebuilders.

So, what will this takeover mean for the sector?

Increased Market Dominance: The merger will create a powerhouse in the UK housebuilding sector, potentially resulting in increased market dominance. The combined entity would have a larger market share, greater resources, and enhanced capabilities compared to its competitors.

Impact on Housing Supply: With Barratt and Redrow joining forces, there could be an increase in the overall supply of housing in the UK. The merged company may have the capacity to accelerate the delivery of housing projects, addressing housing shortages in certain areas and contributing to meeting housing demand.

Geographic Expansion: The merger could lead to a broader geographic presence for the combined entity. Redrow and Barratt both have operations across various regions in the UK, and the merger could strengthen their presence in certain areas while potentially expanding into new markets.

Diversification of Product Offerings: The merged company may have a more diverse portfolio of products and housing developments. This could include a range of property types, from affordable housing to luxury homes, catering to different market segments and consumer preferences.

Innovation and Sustainability: The merged entity may have increased capacity for investment in innovation and sustainability initiatives. This could include the adoption of advanced construction techniques, green building practices, and the development of energy-efficient homes, aligning with broader industry trends and regulatory requirements.

Potential Job Impacts: Mergers often result in restructuring and consolidation of operations, which could lead to redundancies and job losses in certain areas. However, there may also be opportunities for employees to contribute to the combined company's growth and success.

Regulatory Scrutiny: The merger would likely be subject to regulatory scrutiny to ensure compliance with competition laws and regulations. Regulators may review the potential impact of the merger on market competition and consumer choice, imposing conditions or remedies if necessary to address any concerns.

Supply Chain Effects: The merger could have ripple effects throughout the housebuilding supply chain, affecting suppliers, subcontractors, and other industry stakeholders. The combined entity may negotiate different terms with suppliers and subcontractors, potentially influencing pricing and relationships within the industry.

Change is good. It is certainly the life-blood for those of us working in the Interim Industry. Whether those changes occur in the housebuilders themselves or in their supply chains, I suspect there will be plenty of restructuring, renegotiating and associated navel gazing going on in boardrooms across the country as a result of this big news. With changes afoot, as always, those that act soonest come out of it the best.