Newcastle upon Tyne
Sales: £444.3 million (US$602 million)
Market value: £277.6 million (US$408.1 million)
Barratt Developments plc is one of the smaller companies in the construction industry. Yet the firm's size is no reflection upon its growing importance. While building houses is the company's primary business, in recent years Barratt has become involved in a broad range of projects. The most successful of these new activities are the urban renewal operations and the leisure property developments.
The company was founded in Britain in 1958 by Sir Lawrie Barratt. Barratt's original intention was to provide private housing for first-time buyers. This strategy proved to be very lucrative: after a slow start, between 1977 and 1979 alone turnover increased from £99.3 million to £163.2 million. The impressive rise in sales propelled Barratt to the forefront of the British housing industry.
For years prior to Barratt's success, over one-third of new construction activity in Britain had been subsidized by the government. By early 1980, however, this situation had changed; the Thatcher administration drastically reduced appropriations for all building programs, especially public housing. Although the company was initially hurt by the decision, later it was compensated by Thatcher's tax incentives to private homeowners. By 1982 sales surpassed £300 million and the company had built over 1,000 units more than its closest competitor, Wimpey's plc.
By the mid-1980's, Barratt decided to expand its product line. After conducting an exhaustive review of the British housing market, Barratt developed a range of individually designed houses. This series, called the Premier Collection, offered over 60 different house types from which to choose, including retirement and luxury residences.
Barratt management also decided to shift its marketing emphasis away from first-time customers in order to attract second and third-time homeowners. Because of escalating land prices due to the lack of available residential space, Lawrie Barratt thought it too difficult for the company to meet the needs of first-time buyers. As a result, Barratt would concentrate on satisfying the growing consumer demand for larger homes.
However, at the same time the company began building larger private residences, it also initiated a number of successful projects designed to rehabilitate existing urban properties. Joint ventures with city councils, organizations and lending institutions led to affordable housing for urban residents while halting the deterioration of inner-city properties.
In addition to these renovation projects, Barratt also participated in novel development programs for cities throughout Britain. One such plan included offering shared ownership of dwellings through housing associations and subsidized rents for low-income tenants. Another effort, the Charlotte square development in Newcastle upon Tyne, resulted in the construction of inexpensive and attractive modern housing within the city's ancient walls. This marked the first time an industry leader in building private homes committed such large resources to urban renewal.
In 1980, the company created Barratt American Inc., a California-based subsidiary. The U.S. was chosen as a site for expansion due to its thriving housing market and economic stability. Through direct sales, identifiable market segmentation, and low prices, it quickly entered the highly competitve market. In a few years, Barratt successfully established itself as one of the leading firms in the American housing industry.
The most innovating aspect of Barratt's U.S. marketing strategy is the package deal available to first-time buyers. The company offers everything from domestic furnishings to trade-in deals on old homes, and American customers often need only make a small downpayment in order to become residents of a Barratt house.
Barratt sells its products through Sears, Roebuck & Company where potential customers can browse through a fully furnished condominium display. By selling small, inexpensive units in this way, the company has provided a new opportunity for consumers formerly excluded from purchasing a home. While the average price of a California house hovers around $120,000, a Barratt unit can be purchased for $50,000. With these marketing programs, Barratt hopes its trademark becomes as recognizable as that of an American car manufacturer.
Yet, while Barratt's American subsidiary has captured a significant portion of the housing market in southern California, it has recently experienced difficult times. Rising unemployment, high interest rates, low housing starts and the lengthy approval process to secure planning permission to sell some of its units have all contributed to a decrease in sales. Nonetheless, Barratt remains confident that California's rising population and its growing affluence will work in favor of the company's U.S. investment.
In addition to its U.S. subsidiary, Barratt has home-building operations in 40 locations around Scotland and England. In addition to these holdings, Barratt has lately exhibited a talent for the development of leisure properties. Seven luxury resorts, constructed by Barratt Multi-Ownership and Hotels Limited, are located in attractive settings of the Scottish Highlands, Snowdonia and the New Forest. Furthermore, Barratt's timeshare apartments in Costa Del Sol, Spain have had an impressive market reception. This led the company to construct two new resorts on the Mediterranean coast. These developments offer vacationers attractive dwellings in addition to generous amenities. Today, Barratt stands as Europe's market leader in timeshare apartments.
Barratt also participates in an area within the industry known as property investment and construction. By concentrating on specialist building contracts in the industrial and commercial sectors, the company has gained a large financial return. Successful projects include the construction of an office building of bronze tinted glass and natural stone in Glasgow and the completion of factory units at the Stoneywood Industrial Park in Aberdeen.
While the company has a long way to go in achieving its goal of ranking first in the U.S. homebuilding market, Barratt continues to perform well overall. Having grown in just under 30 years from a small operation into a network of subsidiaries both in the United Kingdom and California, Barratt has a very promising future in the worldwide construction industry.
Principal Subsidiaries: Barratt Scotland Ltd.; Barratt Northern Ltd.; Barratt Midlands Ltd.; Barratt Southern Ltd.; Barratt South East Ltd.; Barratt American Inc.
Source: International Directory of Company Histories, Vol. 1. St. James Press, 1988.