Rob Driscoll, ECA director of legal and business, discusses the devastating effects of late payment impacting businesses and individuals across the sector.
Thanks to cross-industry initiatives like Mates in Mind, mental health is finally making its way to the top of many contractors’ agendas and the links between obstructive payment practices and poor mental health are beginning to surface.
A 2019 survey, aimed mainly at business owners, CEOs and managers, was run by ECA and BESA, in association with the Prompt Payment Directory and 25 other industry bodies.
Of all the respondents, over nine in 10 said their business had faced payment issues and nearly two-thirds said they were paid late frequently or very frequently. Nine in 10 also said they suffer an array of mental health problems due to the pressures of late or unfair payment, including stress, depression, extreme anger, anxiety and panic attacks.
“Everybody expects businesses to deal with everyday pressures, but stress and other mental health impacts come from sustained and excessive pressure,” says ECA’s director of CSR Paul Reeve. “It’s absolutely clear from these findings that poor payment is a serious cause of mental health issues across the industry and that the problem, far from being isolated to certain individuals, is commonplace even among top management.”
Over four in 10 said that payment issues had strained their relationship with their partner, with five per cent saying that it caused it to break down entirely. Four respondents said they had attempted suicide as a result of the effects of late payment.
A destructive chain reaction
The survey also shed light on the concrete business impacts of late payment. More than a quarter said that they had been, or had almost been, brought to the brink of bankruptcy or liquidation as a direct result of late payment.
The most common measure taken by business owners to cushion the blow of late payment to employees was to cut or stop their own pay for a period of time, with close to two thirds having done so. A quarter had delayed or cancelled staff social events, and more than one in 10 had stopped or reduced staff perks such as company phones, cars or health insurance.
Alarmingly, almost one in 10 employers were forced to pay their own staff late – an action which can have devastating effects on employees, who may then miss mortgage or rent payments as well as other vital overheads such as utilities and loan repayments.
“These problems quickly knock on to employees and families alike,” adds Paul Reeve. “Findings such as these mean that clients and other buyers need to greatly improve their approach to supply chain payment and it’s a sad reflection on the industry that it will probably need legislation to achieve it.”
“Systemic payment abuse causes broken lives and even broken buildings, and it must be stamped out,” said BESA CEO David Frise. “The economic damage of these practices is well known but this survey has shed light onto its devastating human cost. Thousands of owners and workers of SMEs have struggled and suffered with this abuse for too long.”
What’s being done?
The survey supporters are all part of a wider industry coalition pressing government to reform the practice of cash retentions in construction, widely considered to be one of the most unfair and abused payment practices across the industry.
The BESA and ECA, along with other bodies, continue to push the issue of fair payment towards the top of the Government agenda. One example is the active support for Peter Aldous MP with drafting the Aldous Bill, a private members’ bill which aimed for the mandatory ring-fencing of cash retentions – some £7.8 billion of retentions money has gone unpaid for the last three years.
The Government must take immediate action on cash retentions and other payment abuse, by legislating for change. Doing so will help to address the serious findings in this survey and actually help construction to achieve its dual aspiration of delivering excellence for clients and being an industry that’s attractive to new talent.
Plus ça change…
The construction industry contributes £117 billion to the economy. Simply put, the UK could not prosper, let alone function, without it.
Despite this, construction bears the brunt of every economic downturn and its employees suffer for it. With notoriously low margins and high insolvency rates, payment problems will continue to be endemic in the industry and prevent it from investing in desperately needed skills, technology and growth.
That is, unless a sea change takes place soon.