Worrying times for UK construction giants

Slowdowns change the landscape in many ways – and I don't just mean that half-built developments remain unfinished until the economy improves. I suspect the UK will lose some familiar names from its property landscape in the second half of 2008.

Barratt Homes and Taylor Wimpey both have huge borrowings and have respectively lost 90 per cent and 80 per cent of their UK share values in the past year. Only the bravest of commentators deny that at least one of those names may well disappear, probably as a result of a take-over, in the next 12 months.

Meanwhile Countrywide, the UK's largest estate agency empire which is owned by private equity firm Apollo Management and already accounts for around 20 per cent of all UK realty offices, is known to have made an approach to buy the Halifax chain of estate agents from HBOS. Some less well-known but familiar local names have already disappeared from the housing and commercial markets. But the loss of household names is not restricted to High Street companies.

In quarter two of 2008, UK construction industry workloads have fallen badly, ending an uninterrupted period of growth since the third quarter of 1995. Even public sector house building (now a tiny sector) dropped.

Private house building shows the worst falls but smaller drops hit the commercial, retail and institutional property sectors too.

As a result, building firms and suppliers will start biting the dust too. Looked at brutally, a shake-out where the survivors are the strongest (and those with the leanest debts) may not be a bad thing.

But shake outs have no respect for age and reputation. In this slowdown, being a well known name is no guarantee that you will survive.

Graham Norwood is Property Correspondent at The Observer.