Wimpey attacks Government

SIR CLIFFORD Chetwood, chairman of George Wimpey, the house-building, contracting and minerals group, yesterday launched a bitter attack on government economic policy and urged it to stimulate the housing market.

He claimed that if the recession were to last another two years there would be very few construction companies left in business.

His attack came as the stock market's worst fears were realised when Wimpey halved its interim dividend after reporting a pounds 7.2m half-time loss and offered no glimmer of hope regarding a recovery in its main construction markets.

'I don't accept their theory that if inflation and interest rates fall then the economy will take off,' Sir Clifford said. 'The US is a classic example. Interest rates are down to 3 per cent and mortgage rates to 6 per cent but no one is buying because they lack job security.'

Sir Clifford, 63, who was chief executive of Wimpey until 1991, said that consumer confidence was inextricably tied to the value of houses, most people's single biggest asset.

'Every day that their house is seen as a wasting, dwindling asset - a false unwise investment - the longer we put off a return of consumer confidence,' he said.

He called for a 'sufficient, not massive' stimulus to get the housing market moving.

The interim dividend has been cut from 4p to 2p. Unless trading conditions get even worse, Wimpey expects also to halve its final dividend, to 3.25p, for a total of 5.25p against 10.50p.

Although the stock market had been prepared for a severe cut in the dividend, Wimpey shares tumbled 6p to 71p. Dealers feared that poor trading would dictate another cut in 1993.

Amarjit Chhina, of the stockbroker Barclays de Zoete Wedd, expects Wimpey to make no profit at all this year and only pounds 10m in 1993 when the total dividend could be cut again, to 2p. At its peak in 1988 Wimpey made profits of pounds 144.9m.

Joe Dwyer, chief executive, said that Wimpey's markets continued to be 'gripped in the vice of recession', which was severely restricting the group's short-term profitability.

Wimpey reduced its 14,000 workforce by 1,000 in the first half. There are signs that there will be greater job losses in the second half of the year.

In the UK, housing completions fell by 10 per cent from 3,131 to 2,803 although sales volume was sustained by incentives and support from Scotland and the north of England. Low cost 'social' housing - urban renewal and partnership schemes - accounted for more than 30 per cent of the total.

Average selling prices fell from pounds 65,500 to pounds 60,000 because of the larger proportion of social housing and of first-time buyers, who made up 57 per cent, 10 percentage points more than last year.

North American housing remained under pressure, particularly in California, which has been hit by defence industry cuts. Completions fell from 673 to 540.

Despite gaining more overseas work, contracting order books have fallen from pounds 800m to pounds 600m because of market weakness and a run-down of work on the Channel tunnel. Wimpey is a member of the Trans-Manche Link consortium currently in dispute with Eurotunnel over pounds 1.2bn cost overruns.

Wimpey's minerals operations were hit badly by low volume and prices as demand fell away particularly severely in the second quarter of the year in the wake of the general election.

Mr Dwyer said that cuts in public spending on building and roads and a depressed contracting market would continue to put UK operations under considerable pressure. A gradual improvement was expected in the US.

Disposals of unwanted business, such as offshore engineering and City properties, have strengthened Wimpey's finances. Borrowings are down from pounds 372m to pounds 232m at 30 June, which was before Wimpey sold its 50 per cent stake in the City's Little Britain development for pounds 110m.

View from City Road, page 23

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