July 8 (Bloomberg) -- Persimmon Plc, the U.K.'s second- biggest homebuilder, eliminated 1,100 jobs after the worst housing slump in 30 years dragged down first-half sales by 34 percent.

Persimmon, which dropped 72 percent this year, fell as much as 8.6 percent in London trading today. The cuts, amounting to 20 percent of the York, England-based company's workforce, will save 65 million pounds ($128 million) a year, Persimmon said.

Homebuilders need to reduce costs and write down land values as house prices fall ``faster and further'' with ``little recovery in real terms expected over 20 years,'' Merrill Lynch & Co. analysts said yesterday. Taylor Wimpey Plc, the largest in the industry, said last week it failed to raise funds from investors and will close a third of its offices after mortgage approvals dropped to the lowest in at least nine years.

``There is no hiding place even for the best in class,'' JPMorgan Cazenove analyst Jeremy Withersgreen said in a note to clients today. ``Market conditions are so poor that the group is focusing on cash and costs.'' He has an ``in-line'' rating on the stock.

Banks have reined in mortgage offers, starving potential homebuyers of funds and prompting house prices to tumble the most since the country's last recession in 1992. The U.K. economy faces ``serious risk'' of another recession, the British Chambers of Commerce said today.

Sales by volume dropped 31 percent to 5,501 units and average selling prices declined 4.1 percent to 181,500 pounds from 189,255 pounds a year earlier. Reservations fell 45 percent by volume and cancellations increased to 26 percent from 17 percent in the same period last year.

`Most Challenging'

``The first six months of this year have undoubtedly been the most challenging in Persimmon's recent history,'' the company said. Persimmon expects no ``significant'' writedown of land values and debt is ``comfortably'' within its loan conditions.

``We see land writedowns in the tens of millions, not hundreds of millions,'' Chief Executive Officer Mike Farley said in a telephone interview. The company said it bought 20 percent of its land bank since last year, with nearly half of it purchased at a discount to its market value, Farley said.

Taylor Wimpey has already said it will write down the value of its U.K. land by 550 million pounds and is seeking emergency cash from investors to shore up its finances and secure more relaxed banking covenants. Taylor Wimpey, will need to book additional costs as a ``prolonged process'' of revaluing land sweeps through the industry, Merrill Lynch's Hake said in a note yesterday.

Larger Writedowns

``Larger write downs will follow,'' at Persimmon ``although we believe that the degree to which they will be written down will be smaller that Taylor Wimpey's given the group's superior operating margin,'' Panmure analyst Mark Hughes said today in note to clients.

For the year, Hughes predicted writedowns of 200 to 300 million pounds at Persimmon, with a similar amount next year if prices weaken further. Hughes rates Persimmon's shares ``hold.''

Persimmon postponed construction on new sites in April after sales dropped 24 percent. The job cuts follow Taylor Wimpey, which announced 900 job cuts last week, and Barratt Developments Plc, which is planning to close and merge divisions at the cost of around 1,000 jobs.

To contact the reporter on this story: Tim Barwell in London on tbarwell@bloomberg.net

Last Updated: July 8, 2008 05:21 EDT