Why is prompt payment still an issue?

By Catriona Lingwood, Chief Executive of Constructing Excellence in the North East

Prompt payment, or the lack of it, is such a big issue in our industry and the collapse of Carillion last year certainly brought it back into the spotlight, for all the wrong reasons. Not only does it cause economic and social damage, but it has really tarnished the reputation of the industry, something we work so hard to build, but I can’t help but think we’re really not helping ourselves.

Tier one contractors are still paying their suppliers much later than agreed and withholding retention monies rightfully owed to the suppliers. It’s especially important that money is paid on time in our industry; on a construction site there could be 20 different trades that participated, and money could be held back because of anyone else in the project chain.

The Prompt Payment Code Compliance Board is a voluntary board that monitors late payments and enforces the Prompt Payment Code, which was introduced in 2008 in an effort by the department for Business, Energy and Industrial Strategy (BEIS) to establish a set of voluntary principles for firms to ensure their suppliers are paid fairly and on time. The PPC was intended to be a driver for change but it has struggled to have an impact due to a lack of funding and unrealistic expectations – something which needs to be managed to enable it to do its job. Carillion was one of the signatories of the PPC and therefore could have been subject to investigation, but nobody told them about Carillion’s payment record until after it collapsed, and it was too late.

In an ideal world, late payment would no longer be a thing, but while we work at changing how a lot of companies operate, there are things we can be doing to help. The Board have received very few challenges against poor payers in the last few years and we know from statistics that that’s not because there aren’t any cases. In 2016 it received 16 challenges, 25 in 2017 and 21 last year so there is clearly a reluctance in people putting forward challenges and that needs to change.  As we know, small businesses suffer most, with most of them being used as the bank of bigger companies and its usually SMEs that are scared to put forward challenges. Last year, small businesses were collectively owed £14bn in late payments. That’s across all industries, but I bet our industry contributed a lot towards it.

In everyday life you pay for things immediately, whether that be goods or services, and you wouldn’t dream of asking to delay the payment or paying less than what was due, so why should our industry be any different?

For more information on Constructing Excellence in the North East, please contact chief executive, Catriona Lingwood, on 0191 500 7880 or email catriona@cene.org.uk