Tougher action on late payments is high on the construction sector’s wish list for the 18 March Budget, says an expert at the UK200Group of independent chartered accountancy and lawyer firms.
John Painter, managing partner at CB Chartered Accountants in Worcester, who chairs the UK200Group’s property and construction special interest group, said the issue of slow payments, particularly from large contractors to smaller firms further down the supply chain, remained a major headache and a threat to the financial viability of some businesses.
Last year, research by insolvency and turnaround trade body R3 found the construction sector had significantly the worst track record for slow payments and described the problem as “almost endemic” in the industry.
“The mood in construction is generally pretty upbeat but tougher action from the government to really challenge slow payments – like revisiting late payment fines, an idea thrown out at the consultation stage a couple of years ago – would be welcome.
“It was announced last month that the government-backed Prompt Payment Code would promote 30-day terms as standard, rather than 60 days while new rules were also introduced that mean every business in the public sector supply chain must comply with 30-day payment terms, including suppliers and sub-contractors.
“Those steps set a good example, although signing up to the code is purely voluntary, but the whole late payment culture needs to change and that won’t happen without the government showing it is serious about stamping out the problem.
“Of course, smaller firms can be proactive in chasing money owed but at a time when the economic recovery is still bedding in, they may fear antagonising larger contractors and putting future work at risk.
“With a general election just around the corner, certain announcements made this month may quickly come to a grinding halt if there is a change of government after the general election in May. But with all the parties committed to rebuilding the economy, taking action on late payments would be one area they could surely all agree on.”