The human cost is too great. The scandal of payment abuse in the construction industry must stop now

As a disturbing new survey revealed the tragic human cost of payment abuse in the construction industry, the head of a leading trade association called for action to outlaw practices which are damaging individuals as well as businesses.

Fiona Hodgson, chief executive of the Scottish and Northern Ireland Plumbing Employers’ Federation, said issues such as payment retentions, late payment and even NO payment had been exposed by the survey as taking an unacceptable toll.

She called for immediate consideration by the Scottish Government to extend the use of project bank accounts, introduce a retention deposit scheme and mandate 30 day payments in order to create a resilient and sustainable construction sector.

Ms Hodgson, whose organisation represents more than 750 member firms employing more than 5000 operatives, was speaking following a survey released last month (December 2019) by leading engineering services trade bodies ECA and BESA.

It showed that business owners suffer an array of significant mental health problems as a consequence of late or unfair payment, including:

  • Stress                                                  80%
  • Anxiety and/or panic attacks           40%
  • Extreme anger                                   38%
  • Depression                                         36%
  • Insomnia                                            36%
  • Suicidal feelings                                10%

She said: “It is completely unacceptable that such a significant proportion of business people are driven to extreme lengths such as considering taking their own lives as a result of being denied monies which are legitimately owed to them.

“Along with other trade bodies, we have been campaigning for a long time on the issue of payment abuse, but this survey brings it into the spotlight and any reasonable person must accept that action is necessary – now.”

Ms Hodgson said that the main argument put forward by companies supportive of retentions was to ensure remedial work was undertaken, However, she believes that professional, accredited companies would always undertake such activities for simple reputational reasons.

She also pointed out that delayed or denied payments had knock-on effects, with business owners unable to pay themselves a salary, having to delay payments to others, including employees, or having to scale back operations.

She went on: “The Carillion failure, in which secondary companies lost in the region of half a billion pounds in retentions, has to be a wake-up call. If there is another failure of this magnitude, it could explode the whole sector.”

While SNIPEF welcomes the Scottish Government announcement of an industry-wide consultation on the use of cash retentions in construction she stressed the need for the results of the consultation to be acted on and quickly. Over the years there have been numerous consultations and reports about payment issues which have not resulted in action but, she insisted, “this time it has become too bad. Something must be done”.

The consultation comes after a review of the system of cash retentions carried out by consultants Pye Tait for the Scottish Government and ends on 25 March 2020.