Late Payment: Not an Industry Problem but a Company One?

Here, the National Federation of Builders argues that the late payment problem should not need a construction industry-wide solution and that individual companies need to take responsibility.

AS THE JOYFUL mist of wishing people a happy New Year vanishes, the perrenial issue of late payment is once again rising to the fore.

The SEC Group, which represents the specialist engineering sector, has enlisted the help of Lord Mendelsohn to introduce the Small Business Commissioner and Late Payments etc Bill [HL].

Some of the measures being introduced include:

  • a statutory limit of 30 days in which all firms will be required to discharge due payments
  • certain unfair practices being outlawed, including charging for inclusion on preferred supplier lists or the payment of fees for earlier access under supply chain initiative schemes
  • the expansion of the role of the Small Business Commissioner to explicitly include construction and being given powers to impose penalties on large companies which are serial late payers, provide false payment performance date and fail to provide requested information as part of investigations.

Late payment legislation

One of the reasons late payment has lingered is because companies hide behind the shield of this being an industry problem when, in fact, it is an issue of individual company responsibility. Construction companies did not need an industrywide solution telling it what was the right thing to do, but inaction by enough companies has brought us to legislative remedies.

Neil Walters

Neil Walters, Past National Chair of the National Federation of Builders, said: “Payments move from one business to another, but we should never forget the human cost of paying late. Enforcement is the key to making these government proposals work so that construction will no longer be the sector with the highest rate of insolvencies and all small businesses can stay open for business.”

A November 2019 survey by the Electrical Contractors Association and the Building Engineering Services Association detailed the mental health cost. The pressures of late payment include stress (80% of respondents), depression (36%) and suicidal tendencies (10%). The human cost has been documented, the human cost is real and late payment will not be solved by a sprawling industry, however positive its other contributions to society. Individual companies need to take responsibility.

Richard Beresford, Chief Executive of the National Federation of Builders

Richard Beresford, Chief Executive of the National Federation of Builders, said: “Companies who have managed their balance sheets poorly should not expect subcontractors to pay for their failures. If supply chains, clients included, are to work as one, the first step is to treat your supply chain as you would want to be treated.”

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1 COMMENT

  1. It’s an issue across all sectors and one the government is aware of, but powerless to do anything. Technology has recently come about – although I’m not sure it’s launched yet – which rewards prompt payment by incentivising customers to pay within terms to get Avios or Cashback. It’s using the carrot rather than stick.
    It plugs into accounting software and the quicker the customer pays, the bigger their reward. I was sent an email about it and I’m going to try it! It’s called Peasy.com

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