Yesterday, the government announced new legislation and powers to ensure payments are made on time more frequently
UK construction late payments are being targeted, with the Small Business Commissioner now able to carry out spot checks and has the power to enforce a 30-day invoice verification period to hasten resolutions to payment disputes.
New legislation will now also mean that maximum payment terms for invoices will be 45 days.
Here we have gathered some reactions to the news from major industry players.
David Allen, spokesperson for the Civil Engineering Contractors Association (CECA) and director of CECA Southern:
“Late payment can starve smaller firms of cash and limit their ability to invest in productivity, innovation, and training.
“CECA has argued for many years that increasing prompt payment by clients and across the supply chain releases money for efficiency and productivity improvements, providing businesses with greater certainty and allowing them to invest and grow.
“The UK infrastructure sector has long been plagued by razor-thin operating margins that impede on firms’ ability to deliver projects and plan strategically.
“We welcome the UK Government’s recognition of this issue and its intention to introduce the toughest late payment laws in the G7. Strengthening the powers to penalise firms that pay late and introducing maximum payment terms will be important steps towards a more sustainable business model for our sector.
“But legislation alone will not be enough to fix a culture in which firms often wait on average more than six weeks to be paid. We need a genuine cultural change across the supply chain from clients and larger businesses so that fair and prompt payment becomes the norm.
“CECA will also continue to campaign for the abolition of cash retentions in the construction sector, which lock up funds that could be put to better use.
“As an industry, if we get this right, we will unlock cashflow across our sector. In doing so we will support SMEs and specialist contractors, allow businesses to operate under more sustainable margins, and free them to deliver the vital infrastructure that businesses and communities rely upon every day.”
Brian Berry, chief executive of the Federation of Master Builders:
“Late payments remain one of the biggest challenges for SME builders, disrupting cashflow, delaying projects and putting many firms at risk. Unlike larger volume builders, small firms work job to job and are far less able to absorb additional costs compared with the larger volume builders.
“The Government’s commitment to tackle late payment in the Small Business Plan will be welcomed across the sector, as prompt and fair payment is vital to the sustainability of small builders and the wider economy.
“Small builders are also facing a perfect storm of rising costs, skills shortages and planning delays alongside these cashflow pressures. It is positive to see the Plan include action to tackle tool theft with the recruitment of 13,000 more police officers, as well as measures to improve access to finance for small businesses.
“The emphasis on future-proofing skills is welcome as investing in training and attracting the next generation is essential to keep the small building sector strong and sustainable. We need to see the Government build on this plan and prioritise delivery of the promised streamlined planning reforms for small builders, particularly the fast track approvals for sites of up to nine houses, which will help small firms deliver the homes Britain needs.”
Richard Beresford, chief executive of the National Federation of Builders:
“As the Government has rightly recognised, SMEs employ 60% of the country’s workforce and generate £2.8 trillion in turnover. In construction, they train 8 in 10 construction apprentices. It is therefore promising to see the Prime Minister acknowledge the devastating implications late payments have on SMEs and the construction sector itself.
“We cannot train enough skilled workers, drive business growth, retrofit our buildings, deliver infrastructure, and build 1.5 million homes in an environment where late payment and unfair terms are acceptable.
“The use and structure of retentions have become increasingly problematic and so alongside late payment, the construction industry has a fantastic opportunity to expose how late payment is used in our sector and hopefully, seven years on from the fall of Carillion, we can see some reforms to end industry destroying practices.”
Debbie Petford, legal and commercial director at the Building Engineering Services Association:
“Today’s policy announcement and consultation confirms that the government understands the need for reform backed by legislation and that the industry must make the necessary changes to its payment culture.
“We have been waiting a long time for proper late payment legislation backed up by real enforcement. We encourage companies from across the engineering services sector to take this once-in-a-generation opportunity to put forward their solutions and help lay the foundations for a future business environment in which they can thrive – not just survive.
“The collapse of ISG last year demonstrated just how vulnerable small contractors are to insolvencies further up the supply chain. Too many perfectly good businesses have been lost because they have been denied the lifeblood of healthy cash flow.
“This consultation is the opportunity we have been calling for to address this blight on our industry once and for all.”
