Cost-cutting contractors, streamline supplier lists

Laing O’Rourke will drop three-quarters of its trade contractors, going from 2,000 to 500. Wates has already cut the number of suppliers it uses from 4,000 to 3,000 and intends to lose a further 1,500 by 2012.

A lucky 500 firms get 80% of its spend. Meanwhile, Morgan Ashurst has reduced its suppliers from 3,000 to 500 in the last year and says it will shed more.

Slimming down the supply chain is nothing new. Taylor Woodrow, Mace and Bovis Lend Lease were all early adopters of this Egan principle. But uncertain economic conditions mean that main contractors will be looking again at the financial health of their subcontractors – and vice versa.

Costain, which began its supply chain rationalisation in 2005 when it announced plans to cut its list of 18,000 to 1,000 by 2012, is a case in point. Last month its procurement director, Chris Squires, said: ‘I’m worried about insolvencies in the specialist market and I want to weed out small, fly-by-night contractors. We want to work with fewer, quality contractors.’

Three suppliers won’t be on any of the above contractors’ lists, however, as they have gone out of business:

I Hills Mechanical & Electrical, a £70m turnover business founded in 1967, was sold to Southern Electric Contracting for £1. According to director David Hill, whose parents founded the company, the firm had lost millions due to difficulties in meeting the performance criteria for a number of Building Schools for the Future projects.

I Weatherwise, the roofing contractor, went into administration at the end of January due to outstanding claims on jobs including Wembley and Malmaison hotel in Liverpool. The managers are reported to be considering a buy-out of the £15m turnover firm.

I Concrete frame contractor Febrey is also in administration. The Bristol firm had a turnover of £9m, according to its last posted results in 2005. The reasons for its demise are not known.