Payment Due

It seems that late payment still remains a major issue in the construction industry, according to a joint survey conducted by the National Specialist Contractors Council (NSCC) and the Federation of Master Builders (FMB).

The NSCC and FMB represent a combined total of c.16,000 businesses in the UK construction sector. The recent survey received 719 responses from businesses with a collective turnover of £3 billion. The survey gives a summary of payment practices in the construction supply chain, covering such issues as retention and bad debts.

Findings

  • The results showed that 92% of those surveyed agreed contractual payment terms with their clients of 45 days or less. However, only 57% actually received payment within 45 days
  • 89% of members agreed contractual payment terms with their own supply chain of 45 days or less and 84% actually pay within those terms
  • On average, members had 2.2% of their turnover withheld in retentions and approximately 45% of retention monies were withheld beyond the agreed contractual terms and overdue for release
  • When working for the public sector, 56% of members actually receive payment within 30 days compared to an average of just 32% across all projects (both private and public)
  • In the last year, on average, members wrote off 12.5% of their retentions as bad debts, totaling in the region of £55m
  • Almost one third of payments owed to members for work undertaken are overdue
  • Almost one third of members have used adjudication to resolve a payment dispute
  • Charging interest on late payment, in accordance with the Late Payment of Commercial Debts Regulations, is not perceived as an effective mechanism with only 5% of members having used it for late payments.

Commentary

The survey suggests that payment practices in the public sector are better than private, which would indicate that the various initiatives undertaken by the government are assisting with payment. However, there are still improvements to be made.

It seems that late payment remains a common issue within the supply chain and more action is needed to ensure payments are made within contract terms. Also, abuse of retentions continues to be a significant problem for the industry.

For more information, email blogs@gateleyuk.com.


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.