Carillion ups pressure on suppliers

7 February 2011

7 February 2011 | Angeline Albert  

Carillion has denied reports that it expects suppliers to offer discounts in exchange for work.

Last November, the construction giant announced it was slashing 20,000 vendors from its 25,000-strong supply base, but the group today told SM it has not told suppliers they must discount prices in order to avoid losing work.

However, a spokesman for the group admitted the reduction in its supplier base did place extra pressure on Carillion contractors to be competitive.

He said: “We offer preferred suppliers an £18 billion order book. It is a competitive market and if suppliers offer discounts, and some instances double-digit proposals, this sets a benchmark for other suppliers.

“We are also under pressure. We don’t do anything different from anyone else in the supply chain market. We take the best price when we can. We also consider other factors such as sustainability and quality.”   

The spokesman made the statement in response to a report in yesterday’s Sunday Telegraph that said some suppliers have agreed to give back 20 per cent of the value of their work (already agreed with Carillion) during the next three years.

Carillion currently spends £3.5 billion a year with vendors. The company’s decision to reduce its supply base is expected to save £140 million annually by 2013.

In May 2009, Carillion’s business services division said it had cut the number of its suppliers from 45,000 to 20,000 over the preceding six months.

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