Clock Is Ticking – Late Payers Put On Notice
The government has released its late payment consultation response confirming a suite of measures to tackle late and poor payment practices.
These include automatic financial penalties, greater investigatory powers and a ban on retentions in construction contracts.
James Butcher, the deputy chief executive of the National Federation of Builders (NFB), said: “Poor payment practice closes businesses, hinders growth and has been a persistent challenge for the construction industry. After years of tweaks without teeth and promises without action, this government has acted swiftly to announce measures that industry has spent decades calling for.”
Legislation to come
Reforms will require primary and secondary legislation, and the construction industry will see further engagement to consider how the reforms will operate.
The government has outlined the following headline measures:
- 60-day cap on payment terms on all large firms when paying smaller suppliers.
- New mandatory interest on late payments.
- All commercial contracts to include statutory interest set at 8% above the Bank of England base rate.
- New powers for the Small Business Commissioner, including adjudication of payment disputes.
- Persistent poor payment offenders may face multi-million-pound fines.
- A ban on retentions, post implementation consultation.
Rico Wojtulewicz, Director of Policy and Market Insight at the NFB, said: “The government must be congratulated for staying the course to tackle poor and late payers. Too many before them have shirked the responsibility.”
Retentions
Wojtulewicz added: “For construction, the main challenge will be the ban on retentions. Retentions are used to ensure performance, compliance and completion but we understand why the government’s hand has been forced by unscrupulous businesses abusing them to pay less and/or balance shaky accounting.
“We therefore thank the government for hearing our recommendation to further consult on the ban’s implementation. This period creates breathing room for adjustment and offers time to progress alternatives, such as accessible surety bonds or insurance.”
On the broader industry challenges relating to retentions, Wojtulewicz said: “We will also be reminding the government that they must continue to pursue the planning and procurement reforms intended to enable work pipelines for SMEs and regional construction companies. The use of retentions grew because regulatory costs made it difficult for constructors to plan work pipelines and afford direct employment, consequently increasing a reliance on sub-contractors where performance was managed through the retention process. Should the government’s planning and procurement reforms succeed, thousands of businesses may again become financially resilient enough to directly employ.”
Picture: The clock is ticking on late payers getting away with it.
