31 January 2008 | Jake Kanter
Suppliers have strongly criticized housebuilders' demands to slash the prices of existing and future contracts.
Their response follows letters sent to suppliers by four separate construction groups imposing cuts of up to 5 per cent on ongoing and future work. Housebuilders Charles Church, Barratt Homes and David Wilson Homes, Bellway Homes and Taylor Wimpey have all warned suppliers of the cuts.
Suzannah Nicol, chief executive of the suppliers group National Specialist Contractors Council (NSCC), told SM: "The cost reductions are part of a growing trend in the construction industry. They are outrageous and are not the way to do business."
The cuts range from 2.5 per cent to 5 per cent. Mike Healy, managing director at supplier Cobsen-Davies Roofing, said the cuts could be the difference between profit and loss: "Three per cent could be everything thing in the job for a subcontractor and cutting that could mean that profits are wiped out."
All of the builders said the economic downturn was a contributing factor in their decision. The letter sent jointly from Barratt Homes and David Wilson Homes referred to "credit crunch difficulties" and Bellway mentioned "instability in the financial markets".
Barratt Homes and David Wilson Homes told SM: "This is normal business practice in a tight market." A spokesperson for Bellway Homes said: "In challenging financial circumstances, it's in everybody's interest to discuss costs." Taylor Wimpey said: "While we do not take these steps lightly, we believe it is the right thing to do at this stage in the market." Charles Church said its supplier matters were private, but there were ongoing negotiations about savings and efficiencies.
Healy said: "The way these cost reductions have been introduced leaves a lot to be desired. It cuts right across commercial practice for no good reason other than to make money." He claimed it was a trend in the sector: "Once one of the housebuilders makes these changes, the rest tend to follow."
Antony Faughnan, chair of the CIPS construction group, said: "We wouldn't want to see business practices moving away from collaboration."
The NSCC is being urged by contractors to seek legal advice about the letters. The Forum of Private Business also criticised the attempt to force lower payments on small contractors.