Electricians warn of ‘double whammy’ of late payments and rising costs
Construction-related companies across Scotland are being hit by a double whammy of rising costs and late payment, according to an influential new business survey which tracks quarterly activity and trends.
On the issue of payment, respondents to the survey confirmed that just under half of all payments from public sector bodies were made within 30 days. But by contrast, only 30% of payments from commercial clients were made within 30 days with the rest taking up to 89 days to settle their accounts.
The survey was carried out on behalf of the Electrical Contractors Association, the Building Engineering Services Association, Scottish electrical trade body SELECT and the Scottish and Northern Ireland Plumbing Employers’ Federation (SNIPEF).
It also showed that the costs faced by companies shot up in the second quarter of the year, reflecting ongoing political uncertainty and wider international commodity ramifications.
More than 70% of respondents said that material costs were higher than at the start of the year whilst 29.51% said that the cost of being tendered to had risen.
Other Scottish Government initiatives to improve payment were having little overall impact with just over 10% of respondents saying that their organisations’ projects used Project Bank Accounts (PBAs).
Darrell Matthews, who took over as managing director of SELECT earlier this year, said: “The construction sector is currently in a good place in Scotland, but this masks some bad practice in the industry, as this survey highlights.
“Whilst it’s good to see some public sector clients’ efforts on fair payment policy heading in the right direction, it is vital to ensure that SMEs, the lifeblood of the Scottish economy, are paid on time.
“It is also a tribute to the resilience of both small and large employers that they are generally more optimistic about future work despite rising costs and recurring late payment issues.
“The Scottish Government could do more to assist SMEs by enforcing their own powers under the Procurement Act to make sure payments are made on time right down the contractual chain. Changes to the levels at which PBAs are introduced would also help in speeding up payment.”
SELECT’s 1,250 member companies account for around 90% of all electrical installation work carried out in Scotland. They have a collective turnover of around £1 billion.
The organisation helps to shape the market environment by representing the industry to all levels of government and helps influence legislation to create industry conditions which enable member firms to provide a quality service and maintain profitability.