The deal to merge two of the largest housebuilders in the UK may go ahead if the two organisations can resolve a “high combined share of land” in an area in Shropshire say the Competition and Markets Authority (CMA).
The CMA stepped in to the proposed £2.5bn merger in March citing concerns about whether the merger could lead to a significant reduction in competition. A merger between the giants would create a company capable of building c.22,000 homes annually. The CMA has identified an area around a Barratt development in Whitchurch, Nantwich, Ellesmere and Market Drayton where both housebuilders hold a high proportion of the available land for building, leading to what it describes as “higher prices and lower quality homes for homebuyers in this catchment area.”
Phase 1 of the CMA investigation in to the merger has now been published revealing the CMA has found no competition concerns, despite acknowledging the merged entity would become the largest housebuilder by volume of short-term land bank holdings, on the basis that on a national level
- the Merged Entity would continue to have a relatively modest market position, with a combined of share of supply of [10-20]%; and
- the Merged Entity would continue to face sufficient remaining competition from other large housebuilders.
It has however identified locations where both housebuilders’ activity currently overlaps where it is concerned about a substantial lessening of competition (SLC). Specifically the issue centres around a Barratt development at Tilstock Road in Whitchurch, and a Redrow development at Kingsbourne in Nantwich.
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.”
Barratt and Redrow now have until 15th August 2024 to submit proposals which address the CMA’s concerns and avoid an in-depth, phase 2 review. Failure to do so will result in the investigation moving into a second phase of review.
