Tom Lowe writing for the website Building has looked at a report by M&DH Insurance on the issue of payment within the construction industry and whether things have improved.
After the debacle of Carillion when suppliers and contractors to the monolith were expected to wait up to four months to be paid – with many never receiving a penny – Lowe reports there has been a slight improvement in the conduct of accounts departments issuing payment.
He reported: “Three-quarters of the UK’s 100 largest contractors have shown no significant improvement on payment times in the past two years, according to new research. Only the top 25% of the leading contractors based on turnover have increased the pace at which they pay their bills by more than four days since 2018, a report by M&DH Insurance has revealed.”
The situation is pretty depressing for the average contractor. Despite the Government’s Prompt Payment Code (PPC) setting out a 30 day target for payment because it is voluntary there’s little evidence things have improved since Carillion.
Lowe reports: “When average numbers of days taken to pay bills were calculated, the top quartile were found to be paying suppliers 12 days earlier. The three other quartiles – those firms occupying positions 26 to 100 – improved by no more than 4.2 days, with the second quartile improving its payment times by just 0.2 days since 2018.
“While the proportion of bills paid after 60 days by the UK’s largest 25 contractors fell by 12%, this figure grew among the smallest 25 contractors surveyed by over 2%. And while the proportion of bills paid within 30 days by the largest 25 contractors grew by 18.5%, among the smallest 25 the figure fell by 5.5%. This is despite a law introduced in April 2017 obliging firms to publish half-yearly reports on their payment practices.”
Ian Carrotte of ICSM Credit said: “This is not good enough as there are still too many construction firms who by internal policy pay late as this in effect gives them free credit. But more seriously it creates cash flow problems for their suppliers which can has caused perfectly sound businesses to go under.”
Richard Hames of M&DH insurance who created the report said the Government’s PPC had only had a limited success saying only companies who pay on time anyway abide by the code. There was still a problem in the construction sector with late payment.
Ian Carrotte agreed but said it wasn’t just the building and engineering sectors who suffered from the condition as it was still an issue across large areas of industry.
Hames said: “With Brexit, the depreciation of the pound, increasing material prices and EU workers returning to the EU, economic headwinds might have affected the bottom 25 more.”
He also said the largest firms may have improved more due to the greater likelihood of them working on public sector contracts, which often have a maximum 30-day payment period written in.
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For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk