CMA raises concern about lessening of competition in one local market in Shropshire
A regulator has told Barratt and Redrow to address concerns over an expected “substantial lessening of competition” in one local market so that the pair’s £2.5bn merger can proceed.
The Competition and Markets Authority (CMA) has today raised concerns that the deal, which was approved by shareholders of both housebuilders in May, might disadvantage homebuyers in an area around Whitchurch, Shropshire, if a resulting loss of competition leads to higher house prices or lower quality homes.
The CMA has now given the housebuilders until 15 August to come forward with proposals to address the watchdog’s concerns. If they don’t, the CMA will launch an in-depth ‘phase two’ investigation which could ultimately lead to the deal being blocked.
Joel Bamford, executive director for Mergers at the CMA, said: “Prospective homebuyers must not be disadvantaged as a result of deals like this one – with the potential loss of competition leading to even higher house prices or lower quality homes.
“Our initial investigation found concerns specifically in one area in and around Whitchurch, the companies now have the opportunity to agree workable solutions which address our concerns rather than move to a more in-depth investigation.”
However, the CMA said it has no competition concerns about the merger, which would create the largest housebuilder in the UK, on a national level.
It said the merged housebuilder would still have a “relatively modest market position” with a share of supply of between 10 and 20% and would “continue to face sufficient remaining competition from other large housebuilders.”
The merger deal, if it does go ahead, would mean Barratt, already UK’s largest housebuilder, would increase its turnover to more than £7bn (based on 2023 figures), compared with the £4.3bn turnover posted by second biggest builder Taylor Wimpey last year.
The CMA’s concerns are centred on an 11-mile area around Whitchurch, Shropshire, which contains four Barratt developments and a Redrow development.
Barratt and Redrow said they will engage with the CMA to agree “suitable undertakings” to alleviate the regulator’s concerns.
A spokesperson said these undertakings “will seek to address the future conduct of sales and build on the Redrow site” but it does not anticipate disposing of any land.
>>See also: Barratt’s acquisition of Redrow: the numbers and key players
>>See also: Barratt deal would not have been necessary if not for ‘dire’ housing market, says Redrow founder
>>See also: Barratt Redrow deal ‘signals sector’s confidence over CMA inquiry’
David Thomas, group chief executive of Barratt, said: “We are pleased that the CMA has found there would be no harm to competition in all but one of the areas in which Barratt and Redrow overlap.”
“We remain confident that the combination of Barratt and Redrow will be approved and that it is in the best interests of our customers and wider stakeholders. Together we plan to build on our shared strengths and create an exceptional homebuilder, in terms of quality, service, and sustainability, helping to deliver the homes the country needs.”
Matthew Pratt, group chief executive of Redrow, said, “Once the CMA process has completed, we are looking forward to our future as one team, accelerating the delivery of high-quality homes that the country so urgently needs.”
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