Contractors faced with swallowing as much as a 10% pay cut from housebuilders, contrary to agreed contracts, are urging the construction minister to prevent the cuts.
Contractors returning to their desks in the new year, were faced with a number of similar letters from several housebuilders about a new pay reduction policy on some existing and all future contracts.

In a letter from firm Charles Church, dated January 15, its contractors were given till the end of the month to respond to its request to discount their prices on future works carried out on existing and new orders by an average of 5%. The letter said 'This action may appear drastic but failure to address the issue will only result in a situation where our commitment to build will be withdrawn as well as subcontractors being favoured where a positive response is received. 'There are various mechanisms for achieving this target but we are suggesting that subcontractors consider the surrender of their retention sums until the end of this year to achieve our aim.'

Contractors have received visits from Nicholas King staff telling them to accept a 10% pay cut on existing contract work or face losing the work. Managing director Nicholas King said 'I think it is just good business sense. We are housebuilders who have to take the pain of the credit crunch and subcontractors should share the pain. 'It's better for a subcontractor to take a 10% cut and keep working as opposed to finding they are out of a job completely. We would have no qualms about taking work away and giving it to a subcontractor who can accept the 10% cut'.

The housebuilders' pay cuts has led to the National Specialist Contractors Council (NSCC) reacting angrily at what it describes as 'bullying' tactics for a pay reduction.

Suzanne Nicol, the chief executive of the NSCC, has written to Stephen Timms, the Minister of State for Competitiveness responsible for construction, calling on him to shake a stick at housebuilders, some of whom benefit from lucrative contracts with local government. Nicol also highlighted the need to uphold commitments made in the Fair Payment Charter.

The Fair Payment Charter, developed by the Office of Government Commerce (OGC) for use on all public sector projects from January 1, 2008, makes commitments in relation to fair payment including payment within 30 days throughout the supply chain. But it is not mandatory.

Bellway Homes wrote letters to those in its supply chain on December 14, asking contractors to take a 2.5% pay cut and 'absorb all increasing costs for the next 12 months'. A spokesman for Bellway said 'We've written to our contractors requesting the 2.5% discount. We're not imposing that. We've also told them to hold prices. It's too early to speculate what our next step will be.'

Taylor Wimpey (of which George Wimpey and Bryant Homes is a part) has imposed a 5% pay cut. A spokesman for the firm said “Taylor Wimpey has written to its sub-contractors as part of its aims to reduce its costs during the current tough market conditions. Existing contracts will be respected. However, we will, by mutual agreement, seek to renegotiate existing and future agreements'.

The NSCC has urged its members to reject requests from firms to comply with the 'unethical' cut in invoice payments and has fought back with its own template letter for its contractor members to send to these firms. The letter states: 'If you seek to make such an unauthorised deduction, we reserve our right to take whatever action we see fit under the Construction Act'.

Barratt Homes, the owner of David Wilson Homes, said '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.'