Bosses at major UK housebuilder Barratt Developments (BDEV.L) are taking a 20% pay cut and giving up next year’s pay rises in order to help sustain the business during the coronavirus pandemic.
The group confirmed in a statement that it was in the process of furloughing 85% of its employees, and protecting the salaries of those furloughed for at least another two months. In March, Barratt closed the last of its construction sites, offices and sales centres.
The International Monetary Fund (IMF) said on Tuesday the global pandemic is likely to cause the worst recession since the Great Depression of the 1930s and do lasting damage to the global economy.
Also this week, the UK’s independent budget watchdog, the Office for Budget Responsibility (OBR), said that the UK economy could contract by as much as 35% in the second quarter of 2020 if the current lockdown persists for three months. In this scenario, unemployment is expected to rise to 10%, compared to 3.9% at the start of the year. That would equate to 2 million extra people out of work.
The British Chamber of Commerce (BCC) said this week that its members were struggling to access the financial support promised by the UK government last month, setting many up for a potentially devastating cash crunch at the end of the month. Around two-thirds of businesses have furloughed staff.
The UK government launched the Job Retention Scheme, meaning the state will pay up to 80% of furloughed worker’s pay while companies will have to decide if they top up the remaining 20%.
Barratt has already saved £100m ($125m) by not paying a 9.8p dividend that shareholders were due to receive at the start of May.
Like most developers, its share price is dampened due to the COVID-19 crisis but it was up near 7% in early trading on 16 April on the cost cutting measures: