Contractors cutting already wafer-thin margins to win work
A leading London developer has said that contractors are cutting already wafer-thin margins in order to win work.
Derwent director Paul Williams said margins were tightening which was leading to worries that jobs would be rushed in order to minimise the risk of firms losing money on them.
The developer behind AHMM鈥檚 White Collar Factory built by Multiplex on Old Street roundabout and the award-winning Turnmill building opposite Farringdon station has already flagged concerns that under-pressure subcontractors are taking shortcuts to finish work.
Last month Derwent said it would introduce clerk of works roles back on to its sites to make sure workmanship was up to scratch.
Williams said: 鈥淚鈥檓 hoping margins go out, rather than go in. They鈥檝e been far too tight for too long and it makes it very difficult for everyone to get jobs done. [But] I probably suspect they鈥檙e coming in.鈥�
He admitted that developers had a role to play and make sure contractors weren鈥檛 putting in suicide bids. He added: 鈥淚t鈥檚 beholden on good developers to sit back and say 鈥榞uys, this has to be sensible鈥�.鈥�
鈥淚t鈥檚 beholden on good developers to sit back and say 鈥榞uys, this has to be sensible鈥欌��
Paul Williams, Derwent
Lipton Rogers鈥� Peter Rogers said low margins were among the two big issues facing builders today. 鈥淚t鈥檚 a miniscule margin industry. The banks laugh at you when you tell them the figure. They wouldn鈥檛 even get out of bed for that sum.鈥�
And James Pellatt, head of projects at Great Portland Estates, said the developer was picking and choosing which firms to work with because of worries some contractors were overstretched.
鈥淚 don鈥檛 mind contractors making margins of 7, 8, 9, 10%, but what I do mind is being three or four months behind programme.
鈥淐ontractors that we鈥檝e had the most success with have been the ones we鈥檝e done the least amount of work with. It pisses me off that we lose labour [from our sites] to a client [on another site] who doesn鈥檛 know what they鈥檙e doing.鈥�
Pellatt said the developer was set to start work early next year on a retail and office scheme at Hanover Square which will be built by Mace.
The firm is also negotiating with contractors on two other office and retail jobs also due to begin early in the new year 鈥� Oxford House, an Orms-designed building to go up opposite the Tottenham Court Road Crossrail station, and a smaller scheme in Whitechapel designed by DSDHA, the practice behind London鈥檚 answer to New York鈥檚 Flatiron building on South Molton Street.
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