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Put up or shut up time on fair payment

Tom Fitzpatrick

The industry’s top contractors take an average of 47 days to pay invoices, Construction News revealed this morning.

Of the top 20 contractors, all bar Laing O’Rourke (which is due to report in October) have had their payment terms published.

These 19 contractors take an average of 47 days to pay, and range from paying 99 per cent of their invoices to agreed terms (Engie Regeneration) to just 17 per cent (Interserve).

All UK companies with turnover above £36m and 250 employees or more must now submit information on their payment practices over a six-month period.

The results make for fascinating reading. The three biggest UK contractors, Balfour Beatty, Kier and Interserve, all take an average of 50 days or more to pay.

In fact, across the 19 of the 20 biggest contractors to have reported their terms, only Amey and Willmott Dixon pay within 40 days on average.

Balfour Beatty, Kier and Willmott continue to offer supply chain finance, which has been much maligned after Carillion used it to push payment terms to 120 days.

Three firms – Multiplex, Skanska and Vinci – had average pay terms that exceeded their maximum standard contracts, which ranged from 30 days (Skanska) to 95 days (Kier).

The information is now out there and, as with so many issues, the construction industry now needs to demonstrate its commitment to improve.

Tier one contractors need clients paying to terms. Specialists need tier ones to stop talking about treating their supply chains well and start actually doing it.

What’s disingenuous is the leaders in this industry who bang the drum on fair payment but aren’t rooting out bad practice in their own businesses.

Today’s data is unaudited so cannot provide the whole story, and not every tier one is abusing its supply chain (contrary to what some would have you believe). But for those tier ones that are, this new level of transparency leaves them nowhere to hide.

On the flip side, it’s time for specialists to recognise that if they want to work for companies, they now have data with which to assess the likelihood of fair payment.

The evidence is in front of you. Start choosing who to work and collaborate with and the good payers will inevitably rise to the top.

As for the tier ones: will any chief executive now admit they are doing badly and pledge to set new targets for payment? I wouldn’t bet on it, but that is where Build UK comes in.

Its chief executive Suzannah Nichol told me in March 2016 that Build UK would benchmark members’ payment terms. It was welcome news then (albeit in response to the government’s plans to force companies to publish data).

More than two years later, these companies have had plenty of warning (and some have no doubt improved their performance) but it still doesn’t make for pretty reading.

It’s good that Build UK is publishing its members’ performance on its website. But to have the government’s minister for implementation (surely one of the more sinister-sounding briefs) Oliver Dowden saying it is “leading the industry by publishing its members’ payment performance” is nonsense.

Ms Nichol calls it a “bold first step”. But surely a bold first step would have been contractors choosing to publish their payment data before the duty to report was implemented.

She is right though to say that the “issue of payment continues to hold the industry back from realising its true potential”.

The government forcing big companies to collate payment data is a good thing and a necessary administrative layer. Now Build UK has the opportunity to show progress when the next set of reporting comes around.

If payment is the single biggest issue holding this industry back, then ensuring payment practices actually improve should be the benchmark by which Build UK is now judged. 

Readers' comments (4)

  • you've just published the so called built to last bonus structure based on profit and cash! don't hold your breath,

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  • Looks like voluntary construction industry payment initiatives don’t work? There is a construction ‘fair payment charter’ but it’s 2018 commitment is to 30 day terms. We can’t rely on the voluntary actions of main contractors to support a healthy supply chain.

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  • Main contractors will do whatever they can get away with. Don’t expect any results from anything voluntary. Project bank accounts and trade contractors direct agreements with the employer are the only way forward. MC’s have had enough opportunity to sort out their affairs and have failed.

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  • StreetwiseSubbie

    Carillions demise not only drew criticism for their director’s; “recklessness hubris and greed”, it has also cost you, me and every other taxpayer our share of the £50 million paid to Carillion’s liquidators! Not to mention the increased cost of a whole raft of taxpayer funded projects.

    What does all this say about our fragile economy, or a government that continues to let work to the big players despite their precarious financial position?

    Yet month-after-month, year-after-year, the worthies trot out the same mantra, that everything is fine; “construction is a world class business; the pride of Britain”.

    But now some of the worthies are bickering; “the leaders are serious about changing the way they do business” cries one, “not so, that’s the ultimate insult cries another”. Whilst the most learned of worthies repeats his stale old calls to “ban retentions.”

    And no point expecting the elected worthies to step in and actually do something useful. They are far too busy bickering over wreaths and burkas and making an almighty mess of things.

    Payment abuse is destroying the UK construction industry, and over 95% of respondents to our last survey think that neither the Trade Associations nor the government are doing enough to solve the problem. So, the time has come for Specialist Contractors to take a stand and to:

    • drop their ‘victim’ mentality
    • refuse to work for poor or negative margins
    • believe in themselves as the backbone of the industry
    • say “No” to the Contractor’s onerous terms
    • stand together as never before at grass roots level
    • demand a better fairer and sustainable future
    • read “The Streetwise Subbie” at https://bit.ly/2Ozw5MT

    Let’s stop bickering and work together to find a way to solve the contractual, payment and a myriad of other problems that are destroying the industry one firm at a time. I want to hear to hear from everyone (worthy or otherwise) who wants to get behind a campaign for effective action to fix the problem once and for all.

    For more information or to add your voice call StreetwiseSubbie.com Ltd on 01773 712116 or email info@streetwisesubbie.com

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