THE ECA COLUMN BSEE


Boosting productivity through fair payment


This month, Paul Reeve (pictured), the Electrical Contractors’ Association’s Director of Business Services looks at the thorny issue of late payments.


‘ Until prompt and


fair payment becomes the standard in construction, the industry will continue to fall far short of its potential. Without financial stability, many firms will not be able to invest, or contribute to, greater UK innovation, productivity and growth.


’


uch of the construction industry has long been held back by a lack of fair and prompt payment along the supply chain, preventing it from reaching its full potential in terms of productivity, innovation and growth.


M


If someone upstream is holding onto your cash, how can you effectively invest in skills and innovation?


Last year, however, the Public Contracts Regulations 2015 came into effect, following sustained pressure from the ECA and others. Public bodies, such as local authorities, must now ensure payment through their supply chains within 30 days. Last year, the ECA issued a Freedom of Information request to local authorities to find out whether they are doing enough to ensure lower tier contractors are paid in good time. While most councils paid their own sub-contractors promptly, many were simply ‘not sure’ if they did.


A substantial number of councils said they did not ensure prompt payment down their supply chain. Around six in 10 local authorities were not meeting their payment duties under the Public Contract Regulations 2015.


Results from ECA Freedom of Information request on fair payment uLess than 1% of councils admit to payment terms of over 30 days and 6 in 10 (59%) say that they pay within 30 days. uAround four in 10 local authorities (38% respondents) say they ‘don’t know’ if they are meeting the legal requirements to pay contractors within 30 days. uIn addition, over six in 10 councils (62%) do not monitor (or don’t know if they do) whether their main contractors pay sub-contractors promptly. uAround one in five local councils (19%) actually say they will be taking 'no steps to ensure within 30 days payment' along the tier 1 supply chain occurs within 30 days. uOver one in five councils (21%) do not plan to contractually oblige suppliers to pay those below them in the supply chain within 30 days.


Disappointingly, the responses from local councils show high levels of (knowing or unknowing) non-compliance with current prompt payment law. The ECA recognised that many public bodies are doing their best to follow the Regulations, and we are encouraging these bodies to share how they do it, to help other authorities comply as soon as possible, and help ensure that all contractors are paid on time.


The commercial sector


The last few years have seen a series of voluntary fair payment initiatives, including the construction industry Fair Payment Charter and the Prompt Payment Code, but these have failed to bring about any major change in commercial sector payment. For us, this clearly points to legislation as the solution. Some potentially significant, payment-related legislation comes into force this month (April), when large companies will have to report regularly about their payment terms and how well they follow them. It will also highlight the best and worst payment performers. All this should bring greater accountability for payment activity, and provide the transparency that the industry urgently needs. Poor productivity will continue to pervade in the industry until the issue of supply chain payment is resolved in both the public and commercial sectors.


Until prompt and fair payment becomes the standard in construction, the industry will continue to fall far short of its potential. Without financial stability, many firms will not be able to invest, or contribute to, greater UK innovation, productivity and growth.


With this in mind, the ECA will continue to work with other influential bodies to develop voluntary initiatives while also pressing for the basic principles of prompt and fair payment to be enshrined in law.


www.eca.co.uk VISIT OUR WEBSITE: www.bsee.co.uk BUILDING SERVICES & ENVIRONMENTAL ENGINEER APRIL 2016 33


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48