Organisations representing 24,000 specialists have written to the Government demanding improvements in payment practices

An open letter to Whitehall states: “The widespread, long-standing, culture to pay small suppliers late – or even not at all – results in hundreds of firms going under every month.

“This is now compounded by the collapse of some major firms, leaving vast amounts of monies owing to their supply chains.  Every day, at least ten construction firms are going insolvent.

“Construction firms experience industry-specific issues that hamper their ability to manage risks associated with insolvency including:

Whilst government commits to pay its Tier 1 suppliers promptly – often within 10 days – barely 5% of firms in the supply chain report that they are paid within 30 days

Prompt payment policies are unaudited by clients and the supply chain cannot enforce them due to the real danger of commercial reprisals that would further damage trading

• loss of title to goods and materials that are incorporated into buildings and structures, but not paid for
• most firms – being small – cannot insist on types of protection,  such as advance payments and payment bonds, that are  available to others
• retentions held for long periods, (monies held back on account of possible defects) means that these are always lost in the event of insolvency further up the chain
• the largest firms are poorly capitalised, so they cannot pay their supply chains without being paid themselves and impose even longer payment periods on small firms
• the industry is bottom-up funded but suppliers cannot continue to do this since bank lending has run dry.

“Any attempt to promote growth by investing in construction activity will not succeed unless the money flows quickly through to the people on the ground.

“We call on the Government and all public sector procurement bodies to listen to the voice of small businesses in the construction industry.  Our six point action plan is:

1. Exclude from public sector works any firm which has a history of poor payment performance
2. Legislate to require that all retention monies are put in trust
3. Abolish pay when paid clauses that result in non-payment to the supply chain when the client goes insolvent

1. Only appoint firms as lead contractors which are sufficiently capitalised to resource the project
2. Ensure advance payments are made so that cash flow is available for firms which have to fabricate or assemble their product prior to delivery on site
3. Increase the use of project bank accounts that secures the supply chain’s cash in a ring-fenced account.

The letter has been signed by:

Professor Rudi Klein

Chief Executive

Specialist Engineering Contractors’ Group

Blane Judd

Chief Executive

Building and Engineering Services Association

Sarah McCann-Bartlett

Director General Designate

British Constructional Steelwork Association

Steve Bratt

Chief Executive

Electrical Contractors’ Association

Terry Potter

Managing Director

Lift and Escalator Industry Association

Robert Burgon

Chief Executive

Scottish & Northern Ireland Plumbing

Employers’ Federation

Newell McGuiness

Managing Director

SELECT
John Thompson

Chief Executive

Association of Plumbing & Heating Contractors

Brian Berry

Chief Executive

Federation of Master Builders

Jane Buxey

Chief Executive

Stone Federation Great Britain

David Frise

Chief Executive

Association of Interior Specialists

Barry J Ashmore

Managing Director

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