Barratt Developments has announced that it will buy rival Redrow for approximately £2.52bn.

The merger, to be named Barratt Redrow, aims to deliver more than 22,000 homes each year in the medium term, which is up to 63% more than the 13,500 to 14,000 deliveries Barratt expects to deliver itself in 2024.

UK homebuilders have been struggling for the past couple of years as a result of high interest rents, which have led to a drop in demand and a rise in building costs.

However, a rise in house prices in the last month, spurred by cheaper mortgage loans, has stabilised the market.

Group chief executive at Barratt, David Thomas, said: "We have great respect for Redrow, its overall strategy, its leadership and employees, and its high-quality homes and communities. This is an exciting opportunity to bring together two highly complementary companies, creating an exceptional homebuilder in terms of quality, service and sustainability, able to build more of the high-quality homes this country needs.

"The combined group would leverage the respective strengths of both Barratt and Redrow, delivering significant benefits to our people, our supply chains, and - most importantly - our customers."

In the year to 31 December 2023, revenue at Barratt dropped by 33.5%, while home completions also fell by 28.5% year-on-year.

However, the housebuilder said that its full year turn-out remains dependent on how the market evolves through the spring selling season.

Head of money at markets at Hargreaves Lansdown, Susannah Streeter, added: “The economic winds have not been kind to the housebuilders and Barratt and Redrow clearly believe they’ll be stronger together, giving the new combined company much bigger clout to capitalise on the structural need for housing in the UK.

"The move is expected to produce around £90m in savings in operating costs of the two companies annually by the end of the third year. Redrow’s share price has struggled to regain its pre-pandemic form and with Barratt enjoying a strong balance sheet and hefty cash reserves it clearly decided the time was right to make a move. Clearly market conditions are still going to be tougher while interest rates stay elevated."

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