Housebuilders scramble to tackle credit crunch crisis

Housebuilders across the UK have this week introduced a wave of emergency measures to cope with tough market conditions caused by the credit crunch.

Several firms have admitted they have followed Taylor Wimpey’s lead and held crisis talks with supply chains, while Persimmon is planning to close three regional offices.

The moves come as RICS data reveals that house prices are falling at their fastest rate since the recession of the early nineties.

Barratt Homes is telling its supply chain it will cut costs by up to 5%, with the precise figure varying between regions. Bellway Homes has also asked for a 2.5% discount on all subcontract and supplier accounts.

It’s outrageous. Housebuilders’ profits are well above the supply chain

Graham Wren, Balfour Beatty Groundwork Engineering

Other housebuilders, including Redrow and Crest Nicholson, said they were talking to suppliers.

The disclosures come after it emerged last week that Taylor Wimpey was cutting payments to suppliers on existing contracts by 5%.

Taylor Wimpey said in a trading update that it expected a “subdued start” to the spring selling season, although it denied reports that it intended to offload its construction division to raise money.

Barratt said discussions with its supply chain had begun after the acquisition of Wilson Bowden last April and were continuing.

Bellway is asking for help but Taylor Wimpey is instructing me. It’s harking back to subbie-bashing

Matthew McAdams, WA Browne

A spokesperson for Barratt said: “This is normal business practice in a tight market and we are duty bound to obtain the most competitive price possible.”

Barratt has also sold 51 of its homes in Kent at below market value to Hyde Housing association to try to bolster its sales. The Housing Corporation, the government’s social housing agency, has asked housing associations to see if they can reach deals to support the delivery of its social housing development targets (see above).

In a letter seen by Building, Bellway Homes has asked subcontractors and suppliers for a discount of 2.5% on all accounts with immediate effect. The company said it was reviewing expenditure and would “expect assistance” from suppliers. A spokesperson said: “We have put the point to suppliers requesting the 2.5% discount, so we’d expect them to come and negotiate with us.”

Persimmon will close its office in Beverley, in the East Riding of Yorkshire, and the Mercia office in Cheshire. It will also close the south-east office of its upmarket Charles Church brand.

It seems all models of better working have passed these major contractors by

Ray Horwood, National Federation of Roofing Contractors

The Beverley office will close on 18 February, making 34 staff redundant.

David Broadbent, chair of Persimmon North-West, said: “We’re reviewing our markets with the current credit squeeze, looking at our overhead base and our cost base.”

Crest Nicholson said it was in regular contact with the supply chain to discuss revised prices. A spokesperson for Redrow said the company often spoke to contractors and suppliers to review agreements.

McCarthy & Stone, the retirement homes specialist, which is less vulnerable to the market, said it was in talks to see “how together we can respond to the changing climate of the industry”. It said it had not asked for discounts.