Executive opinion Payback time


Poor payment practice is a major problem that needs to be urgently addressed. ECA group chief executive


officer STEVE BRATT calls for action, and outlines how the ECA offers help and support for members


W


hat is going to happen to the economy? As the old adage goes: ‘Ask 10 economists for their view, and you’ll get at least 15 answers’ – so who knows?


What we can say is that construction grew in


the fourth quarter of 2012. However, I don’t think anyone is expecting the sector to fully recover just yet. Therefore, we need whatever help we can get. To be fair to the Coalition administration,


construction is higher up the government agenda than at any time in the recent past, and there is a recognition that construction can have a big impact on the recovery. In fact, at a dinner I recently attended with Lord Deighton, the Commercial Secretary to the Treasury, much was made of the importance of speeding up infrastructure delivery. Hundreds of billions of pounds are to be made


available for infrastructure projects, and we need to make something happen as soon as possible. It was, therefore, very pleasing to hear Lord Deighton say that he wants to fill up the order book and also cut some of the current restrictions and reduce red tape. We will, of course, do all that we can to help this.


Overdue payments However, what we also need is for money to flow swiftly down the supply chains. As many businesses in our sector have suffered from late payment, you may not be that surprised to hear that SMEs in the UK supply chains are owed in excess of £30 billion in overdue payments. Unfortunately, the ECA is seeing an increase in payment issues – and also some very unsavoury practices from clients and contractors at the top of the supply chain. ‘OK, tell me something I don’t know,’ I hear you


say. And the simple answer is: ‘I can’t, because you’ve probably heard it all before.’ However, what I would ask is: ‘What have you done about what you have heard? Now, it would be very easy for me to start to trot out all the things that you should do and what the ECA can help you with. However, this is not the place to do so, so I’ll


keep my plea simple, and encourage you to use the support that is available to you from the ECA,


Remember to ask – the ECA provides a raft of top quality services for its registered members


whether it’s for understanding your contracts, checking out a potential client, understanding payment good practice or legislation – or, in fact, any other matter that concerns the effective running of your business. Remember to ask; the ECA provides a raft of top quality services for its registered members. Anything you need clarified or any help you require, don’t leave it until it’s too late. If you don’t know your rights, you’ve got little chance – and you risk leaving yourself exposed.


Government action In the context of the growing issue of late payment, and how it is impacting on the electrical contracting sector and the cash flow of otherwise healthy firms, it has been encouraging to note business minister Michael Fallon MP attempting to get all FTSE 350 companies to sign up to the Prompt Payment Code – a voluntary agreement to promote good payment practices. The code has been around for four years now, but in a letter to the companies in November, Fallon warned that those who did not sign up would now be publicly named. While this is undoubtedly a step forward in


About the author


Steve Bratt was appointed group chief executive officer of the ECA in October 2010. He joined the ECA as chief operating officer in 2007, and became deputy CEO in February 2010.


encouraging some of the biggest players to adopt good payment practice, or be spotlighted for not doing so, the government could – and should – take another important step towards getting the good payment message across. I believe that the government should make signing up to the Prompt Payment Code, and adherence with it, a condition for any company trying to win any government contract. Such a commitment would have a significant, positive effect on the number of companies prepared to sign up to the code and, as a result, this would have a hugely beneficial impact on the supply chain. As I’ve highlighted before, late payment is immensely harmful to cash flow, and this has seen many an otherwise profitable business go to the wall. Taking this step would send a signal to clients


and contractors at the top end of the supply chain that would be very difficult to ignore – and it could make a start on freeing up those billions of pounds in overdue payments that are needed to boost the economy.


March 2013 ECA Today 21


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