SME builders under threat as invoices are routinely paid late

Under new government transparency rules, Build UK has published details concerning the payment performance of its top 24 member companies.

The data reveals that top contractor members of Build UK take more than 30 days to pay invoices. This takes place despite Build UK members having signed up to the Construction Supply Chain Payment Charter, aimed at ensuring standard payment terms of 30 days and abolishing retentions.

Build UK Chief Executive Suzannah Nichol greeted the data in the table as a “bold first step” in showing that industry leaders are “serious about changing the way they do business”, while Implementation Minister Oliver Dowden MP said that “Build UK is leading the industry by publishing its members’ payment performance table.”

The National Federation of Builders (NFB) refutes the assertions made by Build UK. The payment performance data published by Build UK show not only their failure to follow best practice and fulfil a legal requirement to pay clients within 30 days, but utter disregard for small and medium-sized (SME) businesses and regional contractors.

After the fall of Carillion and recent reports highlighting that almost nine out of ten councils are breaking prompt payment rules, the NFB is astonished to see a Government minister praising Build UK for barely fulfilling its legal obligations.

Neil Walters, national chair of the NFB, said, “Fair practice is essential to changing the industry culture around payment, not transparency. Transparency is a legal requirement, not a bold step. Procurement regulations already require 30-day payment terms down the supply chain, but the first thing tier one contractors do is change the contract terms to suit their interests and all but force SMEs to sign the amended terms to get paid.

“Seeing Build UK portray tier one contractors like industry pioneers is the ultimate insult. Build UK members, who make up less than 1% of the construction industry, are failing the 99%.”

According to the NFB, the congratulatory tone taken by Build UK did not show responsible industry leadership and should have instead focussed on fostering best practice.

Change does not happen overnight but it is vital that trade associations representing the largest contractors recognise failure and identify the damage that decades of bad practice on fair payment and retentions has had on 99% of the industry, represented by SME developers and regional contractors.

Being part of that 99%, NFB members have been working very hard to place fair practice at the heart of their payment decisions.

64% of NFB members have clients who are more than 30 days late in paying outstanding invoices, but 50% of reporting NFB members pay their suppliers within 30 days. The other 50% are at able to report that they pay 98% of their invoices within the agreed terms.

While this is a positive assessment, the NFB knows that the industry needs to do more on the issue of fair payment before starting to issue self-congratulatory remarks.

Neil Walters, national chair of the NFB, said, “Responsible leaders do not indulge in half-time celebrations when late payment is far from being eradicated. They instead look at where they stand and get on with the job of making fair payment a reality for the construction industry.”

Richard Beresford, chief executive of the NFB, added, “NFB members have been leading by example on the issue of fair payment and have followed one simple golden rule: treat your business partners as you would wish to be treated.  We must work to abolish retentions and bring fair payment to the construction industry by committing our full support to the Aldous Bill.”