Article written by our friends at WhoJungle.
This article deals with the issues facing trade contractors in the immediate, short term and long term futures.
In order to cover those issues, I will need to deal with a dash of statistics, a little bit of history, some economics and then an outline of the future with a sprinkling of commentary as to what all this means for subcontractors.
What this means for trade contractors.
Basically, there are two significant changes that will apply to trade contractors.
- The long beautiful wave the industry has been surfing since 2002 has now crashed onto rocks; and
- The world is going to be a very different place.
There are large sections of the industry who have no idea what a grind the building industry can be at the best of times when the golden wave of prosperity we have been riding since 2002 comes to an end.
It had come to the point where builders with grim reputations had almost become benevolent. Builders and Subcontractors who were running their businesses and projects quite badly could still make a good living.
Things have now changed dramatically.
As of the end of March 2020, even the most benevolent of builders have started looking for ways to avoid making a payment.
A Consequence of the Virus
A thread on our members forum has revealed that some builders are asking subcontractors and suppliers to reduce their rates by 10 to 15% and are claiming that their supervisors and staff are taking pay cuts.
Builders must know by now that to win a contract subbies cut their price to the bone so how anyone could expect a further reduction of 10 to 15% is beyond comprehension.
Is this just an opportunistic cash grab or a genuine attempt by builders to stay afloat? Time will tell but I would like to hear from any builders who have asked their subcontractors and suppliers for a discount and the rationale behind the request.
Are the builders who are asking for this massive reduction being paid 10 to 15% LESS by the developers?
I would also like to hear from any subcontractors and suppliers who have had these requests made of them.
Either way, it will destroy those who cut their prices because the margins are just not there nor have they been for many years to support any cuts, let alone cuts of that magnitude.