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Interserve 'culture of late payment' slammed

An ex-Interserve employee has alleged a “culture of late payments” to subcontractors exists at the troubled contractor.

Speaking exclusively to Construction News, the insider claimed to be “sick of constantly chasing payment” owed to subcontractors during their time there and expressed fears the business was gaining a reputation as “bad payers” within the industry.

The former-Interserve employee spoke to CN in depth about their time at the contracting giant and explained how they had faced a constant challenge to ensure payment for subcontractors that had done a “good job”.

CN has seen emails from subcontractors expressing their frustration at Interserve’s current payment system, written since the employee left Interserve.

More than half a dozen subcontractors working on several of Interserve’s different multi-million-pound construction projects spoke to CN and made similar allegations of delay tactics when it came to payments.

A source at one subcontractor who asked not to be named told CN they’d been “absolutely hammered” by Interserve, and as a result were asking for payment in advance for work going forward. The source described how the contractor would re-examine work that had already been signed off, resulting in payment being slowed down. Multiple subcontractors have alleged similar delay tactics.

This has also resulted in some subcontractors asking for payment in advance of work being completed and agreeing discounted deals in an attempt to get paid sooner.

CN has learned many subcontractors owed money by Interserve struggled to make contact with the company’s payments team with no direct number readily available for its Birmingham payment office.

However, some of the subcontractors contacted by CN did confirm that there was no problem with payment once terms had been completely signed off, adding that the transfer of funds at that point was prompt.

The ex-Interserve employee told CN: “There is a culture of late payments at Interserve. During my time there I saw them treat the supply chain really badly, not paying them on time. I got sick of consistently chasing payments for subcontractors who’d done a good job and trying to find out why the process took so long.

“I found myself asking management over and over again why subcontractors were not being paid on time, and rarely ever got a good answer. As a main contractor you have to work closely with the supply chain on every job and developing a reputation as bad payers means good companies won’t work with you again.”

Responding to the allegations, an Interserve spokesperson said: “It is the company’s policy to agree payment terms at the start of business with each supplier and to pay all creditors promptly and in accordance with these agreements. We process over one million payments annually, paying valid invoices and certificates to those terms.

“As a responsible business, we work hard with our supply chain to resolve any disputed amounts. We confirm that our policies and practices remain unchanged in 2018 and valid invoices and certificates with our suppliers continue to have been paid in the week they are due.

“Our UK construction business moved to its new regional headquarters at Ingenuity House (pictured) next to Birmingham International Airport earlier this month.”

A profit warning issued in September by Interserve revealed its performance for 2017 would be “significantly below” previous expectations as costs from its problem energy-from-waste contracts rose “significantly” above £160m.

That was followed by the contractor’s October announcement that there was a “realistic prospect” it would fail to meet its loan covenants.

In December, Interserve secured £180m in short-term finance and deferred the test date for its loan covenants compliance until the end of March.

Following Carillion’s collapse, the Cabinet Office moved to quell fears around Interserve insisting none of its suppliers were “in a comparable position to Carillion”.

Earlier this month, Ministry of Justice minister Lucy Frazer revealed the department has contingency plans in place after Labour questioned preparations for the “possibility of the collapse of Interserve”.

On Wednesday, the contractor announced it would close its power business as it looked to “consolidate and centralise its industrial portfolio”.

Tell us your experience of poor payment practices

Readers' comments (3)

  • I'm not sure why this is even a story. From sub contractors to suppliers we all wait at 60 days and often a lot longer, any dispute and the invoice can be lost in the system for months. We have invoices regularly reaching 120, 150 and a small number at 180 days. The attitude to clearing them varies from customer to customer but is time consuming and should not be necessary.

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  • Is Construction News the new Construction Enquirer? Obviously no real news to report - I have worked with Interserve for over a decade they are one of the best at paying us on time

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  • Tom Fitzpatrick

    Thank you for your comments.

    With regard to [anon] at 7.44am, we are aware that this has been posted by an Interserve employee and is thus disingenuous.

    CN continues to take our role in this industry extremely seriously and places great stock in our integrity. Our reporter has gone to great lengths to corroborate this story and given Interserve plenty of time to respond.

    We will continue to report on Interserve in a fair and balanced way. The company was praised for its return to work programme at the launch of our gender diversity campaign, Inspire Me, on Tuesday, for example.

    CN is currently receiving almost daily reports of bad payment in the industry and will continue to report on the practice as we have for many years.

    Tom Fitzpatrick
    Editor, CN

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