In the latest sign of a change in the market, Construction Enquirer have reported that prominent house builder, Vistry communicated with its sub-contractors recently that they were proposing a 10% reduction in payment on existing contracts. While this move has been confirmed, the company has opted to reserve further comments.
Nick Pilgrim, Managing Director of EEBS affirms, "This is confirmation – if any was needed – of the increasing pressures across the industry. Although on the one hand we are seeing both the stabilisation (if not reduction) of material costs, and the cooling of sub-contractors pay rates, the impact of interest rates and declining house prices still outweigh these reductions. The aggressive rhetoric reported in this article suggests that the appetite amongst some in the industry for subby-bashing has never really gone-away!"
As Construction Enquirer went on to explain, Vistry made a strategic pivot by transitioning its business model into a partnerships-only housing business. This shift is part of a broader strategy, spearheaded by Chief Executive Greg Fitzgerald, aiming to return £1bn to shareholders over a span of three years. The return is anticipated as assets are gradually released from the traditional house building division.
Earlier this year, Mr. Fitzgerald told analysts that costs, especially what sub-contractors are paid, need to be looked at. He believes that to keep growing and making a profit, those costs need to be lower.
Sub-contractors Pay has had its Day
In a letter, Vistry explained what their new business plan means for the people they work with. Sub-contractors can expect to have a clearer idea of future work. At the same time, the rising costs of labour and materials are slowing down. Vistry thinks that with these changes, they can do more. They want to talk about a 10% cut in pay on current and future contracts soon, so what should their sub-contractors think?
In the construction world, changes like this happen, and the market currently is causing pains on all sides. Shifts in business plans and contract details are part of the game. We advise sub-contractors to enter these talks ready to find solutions that work for both sides. While it has been a subbies' market recently, the chain only works when all the links are happy, so it's hoped that balance is achieved on both sides.
