City interview: Mike Farley - Persimmon

By THIS IS MONEY
Updated: 07:51 EST, 17 February 2008

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Falling house prices and the credit crunch are forcing Britain's biggest housebuilder, Persimmon, to close three of its 40 regional offices and launch incentive schemes to encourage buyers. But chief executive Mike Farley refuses to be despondent.

Desire: Mike Farley says the urge to own a home is embedded in the UK's culture

'Sales have remained resilient despite challenging trading conditions,' says Farley, whose brands include Persimmon Homes, upmarket Charles Church and Westbury Partnerships, which builds social housing.

'Tight control over costs combined with incentives to help people realise their dream of buying a home is our strategy for good performance in difficult times. The credit crunch and events at Northern Rock clearly damaged consumer confidence.'

Farley does not deny that times are tougher for the housing industry than for many years. But the 54-year-old has been in the house-building business for 36 years and believes Persimmon has developed with the ups and down of the sector in mind.

'The housing market is cyclical like everything else - there have always been rises and falls,' he says. 'But the desire to buys one's own house is deeply embedded in this country's culture and an Englishman's home really is his castle.'

The ups and downs also apply to Persimmon's share price, which has slumped 50% in the past 12 months. Farley also takes this in his stride as he outlines his plan to prepare Persimmon for weathering the storm.

One key, he believes, is making sure the company works in all sectors of the property market, from upmarket to mass-market and publicly funded social housing. But while diversification will help, he also accepts cuts will be needed and buyers will have to be given better deals.

Offices in East Yorkshire, Cheshire and Surrey will be closed while incentives to buyers range from part-exchange deals to help with legal and other fees.

The property slump unpicked

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Farley believes the latest quarter-point cut in interest rates will help the market regain its poise and he predicts the spring will see some confidence returning. Even so the figures do not make happy reading. 'Forward sales' ( properties sold before they are built) are down - £603m in the year to December compared with £701m in December 2006.

But Farley has seen tough times before, having worked in the industry through the housing slumps of the mid-Seventies and the early-Nineties.

After a BSc honours degree in building from the former Lanchester Polytechnic (now Coventry University), he joined Wimpey as a graduate trainee in 1972. He later spent five years as a construction manager for Wilcon Homes before joining York-based Persimmon, where he became group chief executive in 2006.

But Farley claims that his choice of career stemmed from an interest in practical building. 'My grandfather was a carpenter and watching him use hand-built tools like planes and chisels made me want to build things,' he says.

And despite joining the building business in a white-collar job, he believes executives should have knowledge and experience of the building site. His management training at Wimpey began with a stint on site.

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'Being hands-on is vital for managing constructing sites, especially as a young graduate,' he says. 'You must be able to dig foundations and scramble up scaffolding to win respect.' And he still clocks up 40,000 miles a year visiting Persimmon building sites.

But Farley, a father of two grown-up sons, does not live in a Persimmon house. He lives with his wife Janet in a converted 18th Century barn near Oxford - surely a property that would weather a housing slump.