The latest quarterly sector-wide Building Engineering Business Survey, sponsored by Scolmore, shows that payment conditions in the industry remain poor, with the majority of public sector work being paid for after more than 30 days.
The survey, which included data from industry trade bodies ECA, BESA, SELECT and SNIPEF, found that, in Q4 2019, 65% of direct public sector and 84% of indirect public sector jobs were paid for after more than 30 days.
Around half (49%) of respondents said that, in their organisation’s public sector work, clients typically inserted under-30-day payment clauses. Ensuring payment within this timeframe is mandated under public sector payment rules.
ECA director of legal & business Rob Driscoll said, “It is hugely disappointing that, after all the great progress made by public sector in integrating payment initiatives, and in the face of challenges like Brexit, flooding, Coronavirus, IR35 and Reverse VAT, government are unable to ensure their own payment data meets basic legal compliance obligations.”
In addition to consistent late payment, the survey also showed that almost two-thirds of respondents (64%) were facing cash retentions.
BESA director of legal & commercial Debbie Petford added, “In Q4 the industry once again demonstrated its resilience, but as we face more turbulent economic headwinds from unexpected shocks like the Coronavirus, construction SMEs should be shielded from unnecessary burdens like systemic late payment or the abuse of cash retentions.
“The government must prioritise establishing a retentions deposit scheme and ensure the public sector leads by example through mandatory prompt payment.”
Alan Wilson, SELECT managing director, also said, “We have been carrying out extensive lobbying amongst members of the Scottish Parliament to encourage them to support legislation to ring-fence retention monies. This culminated in a recent Scottish government consultation that both SELECT and its members participated in.
“Our message was clear: Cash retentions must be put in a ring-fenced account or scheme. In this way, we are more likely to see the end of a 200-year-old measure that’s been abused to the detriment of small firms which often wait years to get retentions released.”
SNIPEF CEO, Fiona Hodgson, commented, “Along with other trade bodies, we have been campaigning for a long time on the issue of payment abuse. The knock-on effects of these payment conditions not only stunt business growth but also impact the mental health of business owners. We need the government to take action.”
In spite of this, sector growth overall appears to have remained steady in the fourth quarter of 2019. Reported actual turnover stayed the same or increased for three quarters (75%) of respondents versus Q3 2019. Turnover decreased for one quarter (25%) of respondents.
The survey received 489 responses from companies across the multi-billion-pound industry, mainly regarding their performance in Q4 2019 (1 October to 31 December 2019).