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Late payments pose problems
A
ccording to the chief executive officer of the Building Engineering Services Association (BESA), David Frise, the new government
must do everything it can to solve the late payment problems that continue to undermine construction supply chains.
He told the association’s national conference that
Whitehall was “terrified of another Carillion style collapse” and the huge damage that would cause to public sector infrastructure plans. However, repeated failures to reform the industry’s “payment culture” meant another major insolvency was very possible. Mr Frise told delegates at the Millennium Gloucester Hotel in London that poor payment behaviour was part of a culture highlighted in the Hackitt Review that led to “broken buildings and broken people.”
He added that the general election was a great opportunity to explain to politicians that the issue of late payment would undermine plans to tackle climate change. “The huge burden of debt created by the ongoing abuse of cash retentions is forcing many SMEs out of business and robbing our country of their vital expertise,” said Mr Frise.
A recent survey carried out by BESA and the Electrical Contractors’ Association found that nine out of 10 small business owners were suffering from stress and other mental health conditions because of late payment. They also found that half of all small business owners and managing directors had been forced to stop their own pay and one in ten admitted to being forced to pay their own staff late. More than one in three have fallen behind on tax
bills and almost a quarter have cancelled training programmes due to payments being unfairly
withheld by clients. This could be tackled if the next government legislated to safeguard money due to sub-contractors – as proposed in the draft ‘Aldous Bill’, which BESA helped to draft and that gained massive cross-party support during the last Parliament, she added. If the supply chains needed to deliver projects are continually disrupted by poor cash flow and insolvencies – how can you get the work done on time, on budget and to a sufficient quality?
The impact of unfair payment practices also had further knock-on effects to businesses. Nearly one in three said it caused staff morale to drop, while nearly one in six said it led to a fall in productivity. One in five said they were unable to replace broken equipment as a result. Over 90% said their business had faced payment issues and 65% said they were paid late frequently or very frequently.
The survey also revealed that, as a direct result of late and unfair payment, over nine in 10 business owners in construction are suffering from a range of mental health issues, including anxiety and depression, linked to the actions described above. The survey was held in association with the Prompt Payment Directory. Survey supporters cover a range of construction activity, including electrical, plumbing, building, scaffolding, roofing, civil engineering, fire safety, painting and decorating, and interiors.
The survey supporters are all part of a wider
industry coalition pressing government to reform the practice of cash retentions in in construction. Cash retentions is widely considered to be one of the most unfair and abused payment practices in the industry.
4 January 2020
www.acr-news.com
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