Markets fall despite Sunak’s £350bn stimulus

Shares in housebuilding firms have slumped again as the market responded negatively to the chancellor’s announcement of a £350bn package of measures designed to offset the impact of the coronavirus pandemic.

Persimmon, Barratt and Taylor Wimpey, the three largest housebuilders by value, fell 10%, 11% and 8% respectively in early trading, with all other listed firms following a similar path. At one point, Barratt was the fifth-fastest falling firm on the whole London Stock Exchange.

This morning retirement housebuilder McCarthy & Stone said it was cancelling its final dividend payment of the year due to the uncertainty created by the pandemic.

Shares in the housebuilder, which sells primarily to those reaching retirement age, fell more than 9% as it announced it was withdrawing its proposal to recommend a 3.5p per share dividend payment at its Annual General Meeting next Wednesday, given the need to manage cash in the business.

It also said it was considering “a number of actions” to mitigate the likely impact on the business if a large part of its customer base – as the government has said is likely – are forced to stay at home for three months.

Meanwhile, Persimmon, Barratt and Taylor Wimpey, the three largest housebuilders by value, fell 10%, 11% and 8% respectively in early trading, with all other listed firms following a similar path. At one point, Barratt was the fifth-fastest falling firm on the whole London Stock Exchange.

This came as the stock market itself fell sharply, if not by as much. The FTSE 250 Index was down nearly 5% in early trading.

This came as the stock market itself fell sharply, if not by as much. The FTSE 250 Index was down nearly 5% in early trading.

Shares in each of the three biggest builders have now fallen more than 50% over the past month in the wake of the growing crisis.

The falls came despite a welcome from industry for the package of measures announced by Rishi Sunak yesterday. These included £330bn of loan guarantees to support business lending, £20bn in other aid to protect businesses, a mortgage holiday for home-owners and cancellation of the introduction of a new IR35 tax regime for the self-employed.

Sunak said yesterday that the measures equated to 15% of the UK’s annual GDP and promised that the government would “do whatever it takes” to tackle the economic crisis. 

However, the CBI said the government needed to come up with more measures to support businesses’ cash flow – such as tax deferments – and individual incomes. 

While homeowners may get to benefit from a three-month mortgage payment holiday, those renting have had no specific support so far. This morning, business secretary Alok Sharma said the government was discussing how to go farther, particularly in terms of support for employees.

Construction firms were largely insulated from this morning’s falls, with Morgan Sindall and Balfour Beatty both dropping by less than 2%. Galliford Try even recorded a gain. Of the listed construction firms, only Kier fell faster than the market, recording a drop of 6% in early trades.

As recently as the end of January, McCarthy & Stone said it was proposing the £17m dividend payout as a signal of “the board’s confidence in its new strategy”. It has already paid out 1.9p per share to McCarthy & Stone investors this year, but had been proposing a further 3.5p per share payout.

Today the firm said in a statement to the City that it was doing all it could to prevent infection at its retirement developments, but that the government’s likely imposition of mandatory “self-isolation” for those over 70 for three months would have a “inevitable” impact on the business.

It said: “At this stage, it is too early to speculate on the full extent of the resulting impact on our financial performance for the full year and beyond. However, we do anticipate an inevitable material impact on trading in the coming months.

“The board is currently evaluating a number of actions to balance the preservation of cash with the long-term needs of the business.”