The Competition and Markets Authority (CMA) is currently assessing whether the proposed acquisition of Redrow by Barratt could potentially lead to the establishment of a relevant merger situation under the merger provisions outlined in the Enterprise Act 2002.
The CMA also aims to determine whether such a situation could see a significant decrease in competition within any specific market or markets in the United Kingdom for goods or services.
In light of this, Newspage asked experts if they think the CMA is right to investigate the acquisition, what would be the benefits of the acquisition, and what the CMA could specifically be concerned about?
Their views are below.
Reaction:
Ranald Mitchell, director at Charwin Private Clients:
“Aimed at cementing their position as the UK’s number one housebuilder, Barratt’s acquisition of Redrow has come under welcomed scrutiny from the Competition and Markets Authority.
“Underpinning competition in the UK market is key for pricing, value and competition and the merger is compromising the foundations of these principles.”
Charles Breen, founder at Montgomery Financial:
“Behemoth Barratt’s bold bid to gobble up its rival casts a chilling cloud over consumer choice and undermines the essence of true competition.
“It’s only fair that the CMA investigate this, as we know that lower levels of competition only drive up prices, and can we afford anything else to drive up already unaffordable homes?
“There should be a cast-iron no to the merger from the CMA if they have any backbone, but how often have we seen bodies like this wither in the sun?”
Riz Malik, director at R3 Mortgages:
“Competition is as essential in the housing market as in the mortgage market.
“The CMA is right to look under the bonnet of the Barratt Redrow transaction to ensure that we don’t end up with a monopoly in the already fragile new build market.”
Gary Bush, financial adviser at MortgageShop.com:
“The UK Competition and Markets Authority is showing its teeth at the moment to large corporates, especially after the recent attempted acquisition of the Telegraph Newspaper.
“The CMA is quite rightly considering whether it may be the case that the acquisition of Redrow Homes by Barratt’s Home Division might have the effect of irreversibly damaging market competition for buyers.
“Our opinion is that over the past three decades, the country has suffered, more than benefitted, from such large-scale mergers from important players involved in the property market and it does remove the competitive edge for housebuyers if this continues to be allowed.”
Lewis Shaw, owner and mortgage expert at Shaw Financial Services:
“There are no benefits to his merger for anyone except shareholders.
“We already have a situation where too few housebuilders control too much of the market, drip-feeding developments to maintain profit margins.
“Allowing this acquisition would strengthen that cabal further and do nothing to increase housing volumes materially.
“This investigation by the CMA comes at a time when large housebuilders have been accused of essentially price fixing, so it’s important now more than ever that this is scrutinised properly.”
Darryl Dhoffer, adviser at The Mortgage Expert:
“Hope the CMA rock the foundations of these two big hitters, and unravel the backroom merger, that is being proposed.
“We need more competition in the housing market not less.”
Scott Gallacher, director at Rowley Turton:
“Given the dire state of house building in the UK, characterised by a chronic shortage of housing, allegations of land banking, and some of the highest house prices in Europe, it’s imperative for the CMA to conduct an investigation.
“The housing market desperately needs more competition, not less.
“While the merger might offer benefits for shareholders such as synergies and cost-cutting through potential job losses, it remains uncertain whether these will translate into lower prices for consumers, given the existing imbalances in the UK housing market.
“Moreover, it’s essential to consider that the anticipated impact of synergies and cost savings may be overstated, as the housing market often relies heavily on local labour and supplies.”
Amit Patel, adviser at Trinity Finance:
“The CMA investigating the Barratt’s proposed acquisition of Redrow will reduce competition in the market and ultimately push up prices.
“Healthy competition affords protection for the consumer helping to achieve competitive prices, ensuring product quality and integrity in the market a firm operates in.”
