Landlord sheds 90 staff as construction work dries up following spending cuts
Redundancies cost Gentoo £2 million
Gentoo Group spent nearly £2 million on redundancy payouts last year as the economic slowdown and grant funding cuts hit its construction arm.
A redundancy programme saw the north east-based landlord shed around 90 employees in 2010/11. The job losses were overwhelmingly drawn from its standalone house building arm Gentoo Construction, which has a turnover of £92.1 million, up from £72.3 million last year. The majority came through voluntary redundancy.
In its annual report published this week, David Crawford, group chair, highlighted the loss of public funding and the downturn in the construction sector as reasons for the redundancies.
In the report, Mr Crawford said: ‘Any hopes we may have had that the incoming government may take a favourable view on housing expenditure evaporated in the comprehensive spending review [in October 2010] with housing taking a substantial cut.’
He added that job losses were ‘an inevitable consequence of a downturn in the construction sector, particularly from markets that have been reliant on public funding.’
Andrew Taylor, deputy chief executive of the 30,000-home association, said that the group was able to delay staff cuts until March when it completed a 10-year, £500 million investment programme which started when it took control of 36,000 former Sunderland Council homes in 2001.
He added that the redundancies were not ‘bottom line driven’ but that the external market for construction work had disappeared. ‘The fact is the labour force was too big for the volume of work [we were getting].’
Housing professionals have warned cuts to government funding could lead to more redundancies in the sector. ‘Clearly if an organisation is predicated on house building then they’ll find difficulties with a 63 per cent reduction in funding for affordable housing,’ said Derek Long, head of the north at the National Housing Federation.
Gentoo’s redundancy payouts were £1.86 million in 2010/11. This is higher than any individual landlord paid in 2009/10 but below the £2.7 million Places for People paid out in 2008/09.
Despite the payouts, Gentoo’s operating surplus quadrupled in the year to the end of March 2011, from £5.5 million to £21.7 million. But after interest payments the group was still running at a £2.1 million loss. Total debt at the end of the financial year was £585 million, which gives the group a gearing - which measures debt as a percentage of total assets - of 60 per cent.
Mr Taylor said Gentoo wanted to maintain as high a gearing as possible without breaching the 75 per cent limit in its loan agreements so it has more money to spend on its customers.
In numbers: Gentoo