Builders cut payments to subbies by 5%

Taylor Wimpey, Barratt and David Wilson Homes are all cutting payments to subcontractors and suppliers by as much as 5% as a result of a toughening market.

In a report in Building magazine, Taylor Wimpey said it needed to take “urgent action” after a difficult year for the housebuilding industry and a tough economic outlook.

The housebuilder is introducing a 5% reduction in price on all outstanding works on existing orders and future orders placed after 2 January 2008.

The news comes just weeks after the Office of Government Commerce (OGC) introduced a Fair Payment Charter as a guide to best practice to paying the supply chain.

In a letter to subcontractors, Taylor Wimpey says it is reviewing its own overheads, house designs and build processes but also needed trade partners to “play their part”.

It said: “We have not taken this decision lightly but it is essential that we take this action if we are to secure the long term business for Taylor Wimpey, our subcontractors, suppliers and consultants.”

The housebuilder also said it may review its credit terms for suppliers if it is not able to reduce overall costs.

A Taylor Wimpey spokesperson said:” Taylor Wimpey is committed to reducing costs and we expect our trade partners to work with us to do so”.

Barratt has blamed its 3% average cut on its £2.2 bn acquisition of Wilson Bowden in April 2007.

A statement from the housebuilder read: “As a result of the Wilson Bowden acquisition last year we initiated talks with all of our suppliers and these discussions are now continuing on a region by region basis.” The 3% cut will vary across the country.