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.