According to the research, SMEs in the construction supply chain in Scotland are still suffering from poor payment performance and the latest initiatives by the Scottish Government, while aimed in the right direction, have not yet had a major impact.

In 2018 SEC Group Scotland carried out an extensive survey on payment practices as they affected engineering firms in Scottish construction. The overwhelming majority of respondents were SMEs. Firms were asked to indicate whether there were differences in payment performance in both public and private sector construction.

The research showed that over 60% of public bodies amended payment provisions in the standard forms of construction contract, which often involved extending the payment cycles.  The figure for the private sector was 69%. To compound matters, only 28% of firms surveyed reported that they were paid by public bodies within 30 days, whilst in the private sector the figure was only 24%.

Alan Wilson, managing director of SELECT, said: “These findings are genuinely shocking and an embarrassment for all concerned. Failure to pay contractors on time creates serious knock-on problems in the economy, as well as being a major contributory factor to the mental strain imposed upon owners and directors of Scotland’s SME businesses, the lifeblood of the Scottish economy.”

Tessa Ogle, CEO of the Electrical Industry Charity, said: “The impact of late payments is having an increasingly damaging impact to mental health and wellbeing in the sector. Last year 87% of people using the charity’s mental health services reported having significant financial issues and 67% work for SME’s in the industry. We can no longer look at this as just a monetary issue – the health implications to the sector are significant.”

Alan Wilson added: “We entirely support SEC Group Scotland’s call to the Scottish Government to amend the Procurement Reform (Scotland) Act 2014 to require that all public bodies use project bank accounts (PBAs) so that payments to all suppliers are secure.

“In addition, public bodies should have a statutory duty to ensure 30-day payments are made to all firms in the supply chain. Finally, we agree with the 90% of firms who are supporting the introduction of a construction regulator with powers to impose penalties on poor payers or, in the case of suppliers, to exclude them from bidding for public sector works.”