Persimmon demands 15% reduction in subbies' pay rates

Persimmon wants to slash its costs by demanding another 15% reduction from its subcontractors’ bottom line rates - the biggest of any major housebuilder so far.

In a letter to Persimmon’s supply chain earlier this month the housebuilder said it had been forced to ask for further price cuts owing to the "significant downturn with absolutely no sign of any short term recovery".

Subbies were given until 25 July to reply to the demand. Persimmon said it would reserve the right to re-tender works if suppliers’ response did not "meet this criteria".

Persimmon originally went to subcontractors asking them for a smaller reduction in April.

It followed up that request in another letter in late June, thanking the supply chain for agreed reductions but warning that it needed to "further request that you reduce your contract rates, and if possible, suggest further savings".

But the latest demand of 15% is even bigger than some subbies had feared.

"The housebuilders like to think they know what our margins are but they obviously don’t because of the size of the reductions they are asking for," one subcontractor told CJ.

In a statement, a Persimmon spokesman said: "Given the well-documented, challenging conditions within the housing market, we are closely focused on managing cash flows and are in constant dialogue with our suppliers in order to find ways to reduce costs and optimise efficiency."

Persimmon’s request for price cuts is the latest in a series of increasingly ambitious moves by housebuilders to save cash by cutting their suppliers’ rates.

The round of reductions began in January when Taylor Wimpey subsidiary Bryant Homes sent out letters asking suppliers to knock 5% of their previous bills.