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Carillion payment scheme spreads but jury is still out

Carillion may go down in construction industry history for the introduction of its 120-day payment terms - but other major UK contractors are now considering following suit.

For the last six months, the name Carillion has been used as a byword both for the outrageous treatment of subcontractors, and for efficient, transparent payment - depending on who you talk to.

The contractor, once again ranked second in the CN100 index of the UK’s top contractors, has been upfront about the scheme from the start.

It has been willing - nay, keen - to take on the scheme’s critics and explain why it thinks implementing 120-day payment terms is fair payment because subbies can choose to be paid earlier - for a fee.

Opinion divided

This week, Construction News has spoken to two contractors - Galliford Try and Willmott Dixon - who say they are considering implementing a similar scheme. Balfour Beatty has also confirmed it will implement an early payment system for its suppliers “within the next few weeks”.

But others remain unconvinced of the benefits - fair or otherwise. Bam Construct, Skanska and Interserve have all confirmed they will not be moving to an equivalent early payment facility.

Interserve, which recently topped the Cabinet Office’s league table of contractors’ spending on SMEs, has this week given Construction News an insight into the way it is making the most of mapping technology.

It shows clients all the suppliers with whom they have strong relationships and an assessment of their performance - simple but effective. The firm’s turnover grew 6 per cent and operating profit 8.9 per cent last year, strengthening its position as the UK’s seventh largest contractor in the CN100.

All the data you need

The full CN100 index - plus a wealth of valuable analysis of the performance of the top 100 contractors, leading specialists, top consultants and housebuilders is in the CN100 supplement accompanying this week’s issue. It is also online in the data section of our website, with interactive tables on our data tool CNinsight.

As the industry gears up for that ‘back to school’ feeling that prevails in early September, Construction News has this week mapped out all the Priority School Building Programme batches so far.

Autumn is also the time we open the Construction News Specialists Awards for entries each year. I’m delighted that this year we - and you, I hope - will be celebrating the awards’ 10th anniversary.

With recovery on the horizon, there is no more valuable time to prove you are one of the best specialist contractors in the UK. Ours are the only national specialists awards - I do hope you will enter, or encourage your best suppliers to do so.

Readers' comments (7)

  • StreetwiseSubbie

    Is it just me, or has the industry finally gone completely nuts?

    The government is a big source of construction work.

    The government says it wants to do everything it can to support small businesses, yet it actually places most of it's work with the biggest companies.

    It pays those big companies in less than 30 days, some after 7 days.

    The government's own report says the construction industry is funded by the smaller companies.

    Now those same companies are expected to pay for the privilege of being paid in less than 120 days by the big companies.

    This madness has to stop!

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  • Not surprised that the other named suppliers are contemplating this. I know of one contractor who has gone bust as a result of late payments from one last month. Here is a good idea pay the supplier on time and help them develop.

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  • The race to the bottom continues, and Carillion pave the way.

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  • With the economy showing signs of improvement how will an early payment scheme help the small contractor. Answer it will not, margins have been slashed severely over the past few hard years. Now companies are looking to lower them further, by paying what should be considered on time and charging us for the pleasure. Add the foregoing to the rebates that we are having to pay makes the future of SMES look very bleak

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  • Surely there should be government action on this.... economic recovery depends on the flow of money into SMEs... then into the High Street. Big companies holding onto revenue so their share prices improve isn't the answer! If Government projects offer prompt payment to the main contractors .... they should be contractually obligated to pass payment on straight away.

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  • Well I'm pleased to see there's no support for this payment stance from a company, run by accountants so far removed from the workface that they could never see the effects. But surely, as the company in question prepares its own tenders, those providing bids will factor in the "factoring" costs. If this is maintained across the board the contractor will become less competitive and win less in the D & B marketplace at least? I know of one project rejected by a subbie due to the terms, as the industry recovers perhaps others will be more choosey.

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  • The more companies that implement this scheme, the more the costs associated will become less prohibitive. Carillion are certainly not the only ones using this mechanism. Our company have a number of platforms that regularly auction subcontractor invoices to delay payments, and in some cases assist with early payments. Go outside of the construction industry and in the states and its quite a regular occurrence.

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