20 January 2009 | Jake Kanter
A branch of housebuilder Taylor Wimpey has written to its suppliers demanding a 20 per cent cut in costs.
The George Wimpey (GW) subsidiary in Bristol called on vendors to make the reduction to current contracts "swiftly". It said failure to do so could result in site work being stopped because of lack of funds.
The letter, sent by commercial director Jason Wren this month, said: "Our requirement is 20 per cent off all current orders. Unless this situation is taken extremely seriously and acted upon swiftly there is every possibility that sites will grind to a halt."
Wren added: "Letters like this have been written to you in the past, but never have the consequences of a lack of cooperation been so potentially detrimental to... our very survival!"
The demand follows similar action taken by builders last year when Taylor Wimpey requested a 5 per cent reduction in costs from vendors. Competitors Charles Church, Barratt Homes, David Wilson Homes and Bellway Homes also insisted on price cuts at around the same time (News, 31 January 2008).
Some GW vendors have already rejected the proposals, according to Suzannah Nichol, chief executive of suppliers' association the National Specialist Contractors Council. She said the demands were "astonishing" and the housebuilder was "from another world" if it expected its demands to be met.
Rudi Klein, chief executive of the Specialist Engineering Contractors Group, described the letter as "commercial folly at its worst". He added: "If GW get away with this then other firms might look to take similar action and suppliers will have to tell them to bugger off."
Taylor Wimpey stated the letter was issued only to suppliers in Bristol and was not a national strategy: "It does reflect a national objective to cut costs in line with the reductions in housing prices and sales. This is essential to maintain activity on current sites and to open new ones."
In a trading statement last week the company said it had reduced its net debt by £300 million to £1.55 billion by cost-cutting and decreasing its workload.
Rupert Choat, construction partner at CMS Cameron McKenna, said the economic climate may force others to impose similar cuts: "They will say to suppliers: 'If you want to fight us, then fight us, but you may lose work'. The reality is many of the vendors will accept the reductions."