Barratt slashes subcontractors bills - over 3% in some regions

Barratt has denied that it has jumped on the opportunist bandwagon by firing out letters to all its contractors saying that it has imposed cuts in the amount it will be paying them. Instead it says that the move is a result of the Wilson Bowden acquisition.

It bought Wilson Bowden in April 2007 for £2.2bn.

Whichever reason is true, the cuts are real – running to up to 3% - and they come into effect within days of Taylor Wimpey’s attempt to slash 5% off invoices.

Barratt’s letters to suppliers say that its changes are “immediate”.

One subcontractor contacted CJ to say “this will have very serious implications on small subcontractors such as myself but we cannot dispute the cut as it will almost certainly lead to us being removed from the tender list for future sites.”

Barratt is not at all embarrassed at today’s move.

By way of explanation, 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% is certainly not a standard figure for the cut that Barratt has in mind. In some regions the figure will be more, while in other areas there will be no trimming-back at all.

Fellow housebuilder Taylor Wimpey was first off the blocks, sparking outrage last week when suppliers to its Bryant Homes arm were sent letters detailing plans to knock 5% off their previously submitted bills.

Barratt Homes had previously released a statement that they would not be imposing retrospective payment cuts to contractors – rather that the 3% cash discount will apply “on all works moving forward”.

Letters from Barratt Homes and David Wilson Homes state that they have “been able to make some cost reductions however this has not been sufficient to support our end-of-year position”.

Regardless of the effect on subcontractors, the letter goes on to say “for the sake of clarity you should be assured that this measure is designed to support our current level of sales discounts which will help to deliver our end-of-year requirements”.

Suzannah Nichol, chief executive, NSCC said a number of contractors had contacted the council over the Barratt cut.

Nichol said: “It just beggars belief. It’s interesting that two contractors in the same sector have imposed these cuts within a week of each other. Given its interest in cover pricing within the construction industry at the moment, the Office of Fair Trading might want to look at whether this is an issue.”

As reported in today’s Contract Journal, the NSCC’s legal team believes the actions of Taylor Wimpey and Barratt go against contract law and are advising firms to officially reject the cuts by writing to the firms.

The NSCC has drawn up a standard clause to include in the rejection letters.(see CJ 16 January 2008).

If you have received a letter from Barratt, or any other housebuilder, contact john.leitch@rbi.co.uk