A study by the Electrical Contractors’ Association (ECA) confirms that late payment for subcontractors is endemic across the sector, as main contractors fail to pass on prompt payment terms from clients.
In a survey of ECA members ¹, nearly a third (30%) of respondents report they have had to wait 60 days or more to be paid by main contractors when working on private sector projects. Meanwhile, those working on central Government projects are finding attempts to improve payment times aren’t working. Only 8% of those surveyed say the main contractor regularly passes on the Government’s best practice payment terms of 30 days.
Steve Bratt, ECA group CEO said: “At worst, late payment kills; at best, it severely hampers growth.”
The ECA believes urgent action is needed, as late payment is directly preventing business growth in firms of all sizes. Its research also shows 33% of its members have lost money due to upstream insolvency over the past two years.
Bratt continued: “Tackling late payment is not just a question of survival today. It’s about the future of our industry and economic growth. I am hearing from members who have hit a glass ceiling; they could grow and invest in new technologies and staff, but as a result of the risk of late or non-payment have made a strategic decision not to. If businesses can’t grow, it’s not only bad for our industry but bad for Britain’s economy.”
ECA welcomes Government’s recent commitment to the creation of a special payment charter solely for the construction industry and hopes that this will be tough, meaningful and fit for purpose. It also believes that late payment could be tackled by the wider adoption of project bank accounts, which are already used in Wales and Northern Ireland. A strengthening of the Prompt Payment Code is also recommended to remove and ultimately name and shame firms who don’t adhere to 30 days payment in public sector contracts and as of October 2013, 60 days in private contracts.
Bratt concluded: “Late payment is like any other form of discrimination or abuse, and we should stop tolerating it.”
¹The ECA’s survey polled 230 member firms, between 22 April and 10 May 2013
