Minister threatens clampdown on housebuilding mergers

The Government is threatening to try to prevent further consolidation in the housebuilding sector, after the £643m takeover of Westbury turns Persimmon into the UK's biggest housebuilder with a market share of 10 per cent.

Yvette Cooper, the housing minister, has told industry bosses that she would be concerned if the impact of having fewer major builders was to cut still further the number of new homes being built.

The Government is today setting out its response to the Barker report on the shortage of new housing, and Gordon Brown, the Chancellor, is expected to reveal planned measures in his pre-Budget report this afternoon.

Ms Cooper made a speech at a private lunch with the industry body, the House Builders Federation, last month, where she raised her concerns. Sources who attended the lunch say she tackled the issue of consolidation head-on, saying the Government would have to consider whether further mergers or takeovers might lead to reduced levels of building.

Persimmon expects to abandon a number of Westbury's building projects after a review of its assets.

Ms Cooper's department, the Office of the Deputy Prime Minister, which has responsibility for housing, is not believed to be formally examining the impact of consolidation but is likely to monitor the volume of building work planned by Persimmon and rivals over the coming months.

Sources said Ms Cooper was speaking off the cuff and merely posed the question of whether consolidation reduces output, but chief executives who were at the meeting - held under "Chatham House rules" - came away concerned that the Government would seek to interfere in the mergers and acquisitions activity.

Share prices across the sector were set alight by the Persimmon-Westbury deal, which sparked hopes of a string of other deals. Persimmon is now favourite to go into the FTSE 100 later this month, and both potential bid targets and consolidator companies have seen renewed buying interest from institutional investors and hedge funds. Barratt Developments, which loses its No 1 position by volume after Persimmon's acquisition, reshuffled management in a move that signalled its willingness to plan to integrate big new acquisitions.

Persimmon plans to build 16,700 homes next year, including Westbury, taking its market share to about 10 per cent - well below the level that usually triggers competition concerns. However, the Government has long regarded the shortage of affordable homes, in the South-east in particular, as a big problem for economic competitiveness. The chief executive of one major housebuilder said Ms Cooper's worries about consolidation leading to lower volumes of new homes were misplaced. "You have to look to the medium term and to a strong sector with strong players. The industry wants to build more homes, and it is the stronger businesses that are driving volumes, and the weaker ones which are not able to sustain volume growth."

The Chancellor is expected to signal today that landowners are to face a tax on the uplift in the value of their land which comes when planning permission is granted for new developments. The move could raise as much as £3bn to plough back into projects for social and affordable housing and for improving infrastructure around areas earmarked for new building.