Has the Government found a long-term solution to tackle late payment for SMEs in construction?

Published:  31 August, 2017

In July 2017, the government launched The Taylor Review of Modern Working Practices.

The review concluded that all work in the UK should be fair and equal, ensuring there is an equal chance to succeed for both small and large businesses. However, whilst late payment is an ongoing problem for businesses in almost every industry, the construction industry has the worst payment record of any sector, with 31% of all late payment in the UK.

Government has already taken some action to address late payment. Legislation that came into effect on 6 April 2017 requires large companies to publish details regarding their payment practices and performance twice a year – respectively on 5 October and 5 April.

The revised August 2016 Construction Industry Payment Charter also set out plans stating that, from 2018, all public sector contracts will meet the fair payment commitments and clients will pay their suppliers within 30 days.

For small and medium sized construction businesses, this move was very welcomed. Payment terms exceeding 30 days can lead to severe cash-flow difficulties and unnecessary costs, such as extending bank loans to cover temporary shortfalls.

Richard Beresford, chief executive of the NFB, said: “Construction SMEs such as our members are currently owed more than £30 billion in unpaid invoices. These are the local companies that – while working hard to make ends meet – employ local workers, train local apprentices and generate money in their local economy.

“The construction industry cannot address the skills and productivity crisis if it cannot pay its staff. Government must step up efforts to ensure late payment is tackled more aggressively.”

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