Sheffield Insulations Group (SIG), which has its head offices at Sheffield Business Park and another 500 sites across the UK and Europe, made the announcement yesterday after warning that annual profits will be "at the bottom end" of market forecasts.

Group chief executive Chris Davies confirmed that a "significant" number of the redundancies would be compulsory, .

The cuts at SIG, which amount to about seven per cent of its workforce, should produce £25m of cost savings next year.

Mr Davies said: "We are announcing the closure or merger of 65 branches, 45 of which are in the UK.

"That involves reductions in the UK of about 700 people – that's about eight or nine per cent of our UK workforce.

"These closures are right across the UK. The majority of redundancies are in our roofing and building plastics business, and the majority of these fall outside Yorkshire.

Mr Davies added: "We are also slimming down in head office, but the job losses there will be in the tens rather than the hundreds."

SIG opened its first branch in 1956 and listed on the London Stock Exchange in 1989.

It has two main bases in Sheffield, one in Hillsborough in addition to its head office, and a further 130 sites across the UK, as well as 370 sites in Europe, employing a total of 13,000 people.

The company said like-for-like sales for the UK and Ireland division were down 5.3 per cent in the second half of the year to date, compared with growth of 3.3 per cent in the first half of the year.

Mr Davies said the redundancies have been made necessary due to the decline of the UK housing market.

He said: "There's going to be about half as many houses built in the UK this year as there was last year, and we're expecting further reductions next year.

"We're also seeing a reduction in other areas of construction, such as shops, offices and hotels.

"We are active in a number of market sectors, supplying specialist goods to contractors who are building and fitting out buildings such as houses, schools, prisons and shops. It's our job to supply materials to fit out these buildings and, if they're not being built, there is no requirement for materials and we have to downsize."

However, not all of SIG's businesses have been badly hit by the economic downturn.

The notable exception has been its Miller Pattison business, based in the Chapeltown area of Sheffield, which specialises in fitting insulation in existing homes.

That business, Mr Davies said, has "been going from strength to strength" and has taken on more than 100 staff in the past year.

Numis Securities said it expected SIG to report pre-tax profits of £145.5m this year, with the figure dropping to £95m in 2009.