Trade bodies show concern at ‘disappointing’ payments performance figures
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The decision of Build UK to publicise the payment performance of its leading member companies has caused consternation among the construction sector.
Figures published by the trade body revealed that not one of its top 24 contractor members pays supply chain invoices within an average of 30 days.
According to the statistics, the quickest payer is Willmott Dixon with an average of 33 days while bottom of the league is Murphy Group with an average of 66 days.
Build UK chief executive, Suzannah Nichol, greeted the data in the table as a “bold first step” in showing that industry leaders are “serious about changing the way they do business”, while UK implementation minister, Oliver Dowden MP, said that “Build UK is leading the industry by publishing its members’ payment performance table”.
The Specialist Engineering Contractors’ Group (SEC Group), which represents the largest sector in UK construction by value, has expressed support for the decision to publicise the payment performances but expressed concern that none of the published figures showed payment times of less than 30 days.
The SEC Group said the figures mean that these companies would not be able to comply with the law (under the Public Contracts Regulations 2015) applicable to payment times on public sector works. The organisation added that they are also failing to comply with the requirement under the Supply Chain Payment Charter to discharge payments within 30 days.
SEC Group CEO, Rudi Klein, said that the figures remain disappointing.
He added: “I am concerned that the existing legal requirements and Charters are being ignored. We are urging the government to put in place project bank accounts on all public sector projects. These will enable SMEs in these companies’ supply chains to be paid within 12-15 days; everybody gets paid from the same ‘pot’ without cash having to travel along the cascading layers of contracting.”
Last month the House of Commons public accounts committee recommended that (post-Carillion) government procurers should be protecting firms in the supply chain from payment abuse. The committee recommended the greater use of project bank accounts and the ring-fencing of the much-abused cash retention system. The Small Business Commissioner has also expressed support for these measures.
Mr Klein said that he is also concerned about insolvency risk posed by the balance sheets of some of the largest companies. Trade credit insurers are now reluctant to provide cover in the event of the insolvency of some of the largest companies, he said.
Mr Klein added: “In my view, public sector procurers should have a statutory right to pay firms in the supply chain directly if they can’t obtain credit insurance.”
The National Federation of Builders (NFB) said it refutes the assertions made by Build UK as it cannot possibly represent the construction industry on fair payment.
The NFB said the payment performance data show not only Build UK’s failure to follow best practice and fulfil a legal requirement to pay clients within 30 days, but “utter disregard” for small and medium-sized (SME) businesses and regional contractors.
After the fall of Carillion and recent reports highlighting that almost nine out of ten councils are breaking prompt payment rules, the NFB said it is “astonished” to see a government minister praising Build UK for “barely fulfilling” its legal obligations.
Neil Walters, national chair of the NFB, said: “Fair practice is essential to changing the industry culture around payment, not transparency. Transparency is a legal requirement, not a bold step. Procurement regulations already require 30-day payment terms down the supply chain, but the first thing tier one contractors do is change the contract terms to suit their interests and all but force SMEs to sign the amended terms to get paid.
“Seeing Build UK portray tier one contractors like industry pioneers is the ultimate insult. Build UK members, who make up less than 1% of the construction industry, are failing the 99%.”
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