Sector ‘cautiously welcomes’ Chancellor’s call for late payment evidence

Philip Hammond

Chancellor Philip Hammond’s announcement of a new consultation on late payment has given a cautious welcome by the construction sector.

Delivering his Spring Statement to Parliament this week, the minister issued a call for evidence “on how we can eliminate the continuing scourge of late payments – a key ask from small businesses”.

Trade body the Specialist Engineering Contractors’ (SEC) Group has been driving the construction industry’s efforts to improve cashflow security through the use of project bank accounts and by ring-fencing cash retentions.

SEC Group will be inviting the Chancellor to act swiftly to implement measures that will provide long-term payment security for small firms which comprise the overwhelming majority of businesses in the UK’s construction industry.

CEO Rudi Klein said that over the last 10 years there have been almost 25 different initiatives, reports, codes and charters concerned with improving payment performance in construction but the industry continues to be the worst sector for payment abuse.

He added: “All these initiatives etc. have not brought about the hoped-for improvements in cashflow security. However the wording of the Chancellor’s statement appears to show a determination to deal with the problem once and for all.”

SEC Group intends to urge the Chancellor to support legislation that will mandate the use of project bank accounts and ensure that retention monies are protected in the event of insolvencies up the supply chain.

The Federation of Master Builders (FMB) said the Chancellor’s announcement should be the beginning of the end for unfair payment practices which hit small businesses across the UK.

Chief executive Brian Berry said: “The Chancellor’s announcement of a consultation to tackle the scourge of late payment today should mark a turning point on this issue. We should use this opportunity to bring about a spring clean of payment practices which negatively impact on small business. Construction giant Carillion’s collapse at the start of the year brought to light once again the need to eliminate poor payment practises that plague the construction sector particularly.

“Indeed, one London based small building firm was once paid more than 270 days late by a construction giant. Now is the time to move away from these unsustainable business models which threaten the existence of many firms and their supply chains. This announcement today should be followed by a fundamental rethink ending in the permanent abolition of late payment terms and the exploitative use of retention payments.”

Mr Berry added: “At first glance the Spring Statement has brought some other positive announcements for the UK’s small construction firms. The announcement of a doubling of funding to the Lloyd’s Housing Growth Partnership and an additional £80 million funding to support SME firms looking to engage an apprentice is welcome news. With Brexit looming large on the horizon and the construction industry facing a chronic skills crisis, it’s of the utmost importance that more skilled workers begin to join the sector. An additional £50m to support T level training will further aid this aim.”

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