North Midland chief executive John Homer has told Construction News subcontractors have “had enough of getting pushed around” by contractors over payment and that retentions should end.
“These guys [subcontractors] want to be paid,” he said. “They’ve had enough of getting pushed around by some companies with their 120 days-type payments.”
Mr Homer said North Midland had reduced the time it takes to pay suppliers from 60 days in 2015 to 43 days 2017.
He said: “If we get paid in about 30 days, which is what we accept from our customers, then we’ll turn it around and get it to people in 43 days, which I think is pretty good.”
He added: “These people are running a business, it’s their livelihoods, and I think it’s important that when they sign up to work on our supply chain they know that we’re going to do a good job and they’re going to get paid.”
Mr Homer’s comments came after business secretary Greg Clark said there was an “urgent” need for a crackdown on late payment following the collapse of Carillion, which took 120 days to pay some subcontractors.
“How people can sleep at night with payment terms of 60 out to 120 days – good God, it doesn’t bear thinking about,” Mr Homer said.
Last week saw M&E specialist Vaughan Engineering entered administration, blaming non-payment from Carillion.
North Midland had been “keeping an eye on any supply chain failures” as a result of Carillion, but Mr Homer said the conversations he’d had suggested none of his company’s suppliers were facing “catastrophic” consequences.
Mr Homer, who was a managing director at Morgan Sindall until he took over at North Midland in June 2016, said the culture of bad payment in construction went beyond slow honouring of invoices.
“It’s too easy not to pay as well,” he said. “There’s always a way you can find not to pay people, saying, ‘This isn’t quite right’ and, ‘There’s a scratch on the wall there, so we’re not going to release your retention’.
“That is really just not right.”
Earlier this month, Build UK chair and Mace deputy chief operating officer Mark Castle told CN he wanted to see “consequences” for bad payers and said that Carillion’s collapse could be a “catalyst for change” in construction payment practices.
Mr Homer said: “You don’t see it in other industries; working on the basis of millions of pounds being held back over relatively minor things.
“It’s a cultural thing where we’ve got to push back.”
Mr Homer would also like to see the practice of retentions addressed.
He said: “We should push back on retentions. They’re archaic. We do a good job and we expect to be paid so we can pay our supply chain.”
He added: “I think the confidence in the industry to deliver for its customers and give them what they want at the handover will mean this archaic practice of, ‘We need to keep a retention on you of 3-5 per cent’ has just got to change.”
More than 60 construction trade bodies have voiced support for MP Peter Aldous’s bill to end retentions that is currently working its way through parliament.