Taylor Wimpey, the UK’s biggest housebuilder, is reducing the amount it pays subcontractors and suppliers by 5% in the wake of the credit crunch.
In a letter sent to firms on its supply chain, the £6.7bn-turnover housebuilder said it needed to take “urgent action” after a difficult year and a tough economic outlook.
The housebuilder intends to impose the 5% price cut on all outstanding work on existing orders and on all orders placed after 2 January.
The news comes two weeks after the Office of Government Commerce introduced a Fair Payment Charter, to reduce “mistrust” in supply chains.
Taylor Wimpey said in the letter it was reviewing its overheads, house designs and build processes.
We have not taken this decision lightly, but it is essential for the long term taylor wimpey letter
It said: “We have not taken this decision lightly but it is essential to secure long-term business for us, our subcontractors, suppliers and consultants.”
The housebuilder, which builds 20,000 UK homes a year, also said it might review credit terms for suppliers. The move comes as housebuilders face up to the prospect of a tough year. Persimmon, Britain’s second biggest housebuilder, warned this week that its turnover was set to fall 4% this year.
Suzannah Nichol, chief executive of the National Specialist Contractors Council, branded the decision “outrageous”.
She said: “We believe it’s an unacceptable way of doing business and we would advise any member of a supply chain who has received a letter like this to respond clearly saying they are not prepared to agree to it.”