A new study from the Electrical Contractors' Association (ECA) has revealed building services contractors are still having serious problems getting paid when engaged on public sector work.
The problem stems from slow supply chain payment on public sector contracts. A survey of ECA member firms showed that the majority of contractors (62%) had less than 40% of invoices paid by the main or higher contractor within 30 days, which is meant to be the industry benchmark.
A further 89% of members said that they had seen “no improvement” in payment by main or higher contractors during 2014, despite a range of government initiatives to improve payment in construction.
“This situation highlights why the new Public Contracts Regulations 2015 – which seek to ensure prompt payment throughout public sector supply chains – are an important part of the solution for contractors. Voluntary initiatives were simply not having the intended effect,” said Paul Reeve, ECA director of business services.
“But as often happens, there is both good and disappointing news for construction suppliers,” Reeve added. “On the one hand, the new Regulations enshrine in law the need to pay suppliers in under 30 days - right through the public sector supply chain. This applies to all public bodies, it sets the industry benchmark for good practice, and it’s potentially a game changer. However, the problem is the word ‘potential’ since for some reason the Government framed the legislation so that it does not work well for construction projects. We are going to have to work with the next government to ensure that the Regulations deliver the sort of public sector payment regime that construction suppliers need.”
Reeve continued: "Late and withheld payment is a blight on small and growing businesses. The Public Contracts Regulations are a good start, but they fall short of being the solution in construction. We expect plans to eradicate poor payment practice to be above party politics and we look forward to working with the next government to monitor and further improve the payment situation for contractors."
The Public Contracts Regulations 2015 (SI 102) started to come into force in February 2015. Guidance on the Regulations was issued in March. The Regulations are at: www.legislation.gov.uk/uksi/2015/102/contents/made