HOUSEBUILDER Barratt looks set to complete its £2.5 billion takeover of rival Redrow this week despite concerns from the Competition and Markets Authority (CMA).

Barratt has temporarily waived local competition concerns of the watchdog in its Phase 1 investigation that its buyout of Redrow could lead to higher prices and lower quality homes in and around the Shropshire market town of Whitchurch.

In an update on Monday, Barratt, which is headquartered in Leicestershire in the East Midlands, said the CMA had not flagged any concerns about the merger on a national level with Whitchurch representing just one of more than 400 areas where the two companies overlap.

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It said both companies are working to come up with solutions, stating: “Barratt and Redrow are continuing to engage with the CMA with the objective of agreeing suitable undertakings which would address the CMA’s limited concerns and avoid the need for a reference to a full Phase 2 investigation.”

Waiving the CMA’s concerns, Barratt noted, “removes uncertainty for the employees, supply chain and wider stakeholder groups of both businesses, and allows us to accelerate the creation of an exceptional UK homebuilder in terms of quality, service and sustainability, which in turn can accelerate the delivery of high-quality, sustainable homes and communities for customers across the UK, addressing the country’s need for homes”.

If Barratt is granted court signoff for the deal today as anticipated, trading in Redrow shares will be suspended on Thursday with new Barratt shares issued by Friday although in accordance with CMA rules the full operational integration of both businesses will not start until the watchdog’s conditions are met.

Barratt, the UK’s biggest housebuilder, confirmed that the two businesses expect to have fully merged within 18 months of the acquisition, with efficiencies and cost savings due to take shape after three years.

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The merger is likely to result in annual cost savings of at least £90 million, with a one-off cost of about £73m to achieve that figure. This is expected to be partially achieved by a restructuring of staff and offices as overlapping roles are cut, which could lead to the loss of about 10% of jobs across the combined business.

Meanwhile, the merged group – to be known as Barratt Redrow –  is expected to build about 23,000 homes a year and have a turnover of more than £7 billion.

In July, Barratt underlined the scale of the challenge facing the new UK Government as it aims to secure a huge increase in the number of new homes built in the country.

The housebuilder warned the number of homes it expects to build could fall by up to 7% in the current year although Chancellor Rachel Reeves has said the new government will act swiftly to address a chronic shortage of homes.

While planning is a reserved matter, builders in Scotland have complained about the system for years. Barratt said reform of the planning system was key to tackling the undersupply of new homes but also underlined the significance of other factors that could weigh on activity for some time.

UK homes builder Barratt to buy Redrow for £2.5 billion

Barratt said it expects to build between 13,000 and 13,500 new homes this year, down from 14,004 in the year to June 30, citing “another year of economic and political uncertainty”. That total was down by 18.6% from the previous year, when it built 17,206 homes.

At AJ Bell, investment director Russ Mould said the merger would create a new leader in the UK housebuilding space as he noted that the issues raised by the competition authority “always looked surmountable given they were restricted to just one part of Whitchurch in Shropshire and Barratt has waived the CMA clearance condition which had been written into the deal”.

Mr Mould said: “An enforcement order from the regulator is likely but Barratt and Redrow are ready for it and will presumably do what’s necessary to prevent the probe going any further.

“The all-share deal should allow Barratt to replenish its landbank – a necessary pre-condition to ramping up volumes – with prices in the open market not having retrenched as much as might be expected in the current cycle.”

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He noted that “Barratt will hope its timing is good as the industry looks to pick itself off the floor following a difficult few years marred by a weak property market and rising interest rates, adding: “Management will be buoyed by figures from Rightmove showing a big increase in enquiries on homes for sale since the Bank of England cut rates at the beginning of this month.

“Speculation could now build over whether either of Barratt’s main rivals – Taylor Wimpey and Persimmon – might pursue their own deal in response.”