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HSBC’s will spend only on 'flexible' suppliers

Banking giant HSBC has told suppliers it will only spend money on contractors that are prepared to innovate in the current economic conditions.

The firm said it has up to £250 million to spend on refitting and rebranding its High Street branches this year but problems with the financial markets mean its budget could be reviewed.

Its head of capital projects in the UK has warned current and potential suppliers they must be flexible and deliver on cost if they want to work with the retail banking giant.

Stewart Sharp, who has been in charge of HSBC’s development programme for the past two years, said: “The key attribute we are looking for from our supply chain is flexibility.

“When I am asked to change what I am doing to reflect a customer change, my supply chain needs to be able to move quickly. As the credit crunch has appeared, the financial and retail sector has become more cautious in regards to capital investment.

“We tend to analyse opportunities much more thoroughly now to make sure they are right for us. With the credit crunch, and changes you have in the retail sector, every project is faced with difficulties.”

He added: “We will definitely be looking at the cost-income ratio in more detail – the overriding decision has to be one of value-adding now.”

Mr Sharp said rebranding and “cosmetic treatments” would be the key focus in the year or two ahead as the business adjusts to the current credit situation.

Last year the bank began its programme to upgrade its UK retail branch network, which is made up of 1,500 sites.

The bank has delivered almost 250 branches under the programme, either as a re-fit of its current estate or as new build.

It spent £250 million on capital works last year and has said it will spend a similar amount on its programme for 2008.

The business has cut its supply chain in half over the past 18 months in an attempt to form a closer relationship with suppliers and ensure better cost and time predictability.

And while Mr Sharp described the bank’s current supply chain as stable, he admitted: “We are always tal king to new companies. We have slimmed down our supply chain a little bit so that they each get a bigger slice of the cake, but on an 18-month basis we will then revisit that situation to ensure we are still using the people that are appropriate for us.”

HSBC’s contract with Carillion, which carries out the construction of the bank’s office quarters, is up for renewal within the next few months.

Mr Stewart declined to comment on the progress of discussions, but described the agreement as “a long-term framework”.

About HSBC

10,000 Number of properties it owns world-wide

83 countries the bank has offices in

£12.3 billion Group pre-tax profits in 2007, up 9.6 per cent

12.7% Increase in net operating income, up to £31.5 billion in 2007

HSBC, which calls itself the world’s local bank, has its headquarters in London