Housebuilder responds to tough economic outlook by cutting payments to subcontractors and suppliers

Taylor Wimpey, the UK’s biggest housebuilder, is cutting payment to its subcontractors and suppliers by 5% as a result of the toll the credit crunch is taking on its business.

In a letter sent to firms across its supply chain, seen by Building, the housebuilder 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 two 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 its letter, 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.

The move comes as housebuilders face up to the prospect of a tough 2008. Turnover at the UK’s third biggest housebuilder Persimmon is set to fall 4% this year, the firm warned today.

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”.