Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Kier FD: 'We're not looking to change payment practices'

Kier’s finance director has defended the firm’s payment practices following criticism at a select committee hearing, claiming the firm is “consistent” and that the onus on improvement must sit with clients.

Speaking exclusively to CN, Bev Dew called for “equality” in payment throughout the supply chain and said £60m of payment to suppliers was going out within 21 days through its early payment facility.

“The key is for equality […] the onus on [prompt] payment cannot just sit with the main contractor; it’s got to sit with the client and you’ve got to make sure the risk transfer and the payment transfer is all commensurate,” he said.

In a select committee hearing last week, Kier, along with maintenance firm Mears, was cited as one of the worst payers in the industry by an SME owner giving evidence.

Responding to the accusations, Mr Dew said: “We value our supply chain relationships and we try to pay our people as consistently as we can.”

According to self-reported data on the government’s payment practices portal, Kier Construction paid its suppliers in 54 days on average.

Compared with other tier one firms, Mr Dew said he believed Kier was “pretty much smack in the middle” when it came to payment terms.

According to CN’s analysis of the payment reports submitted to government by the 10 largest contractors, only Costain takes longer on average to pay suppliers at 59 days.

At 54 days, Kier matches Balfour Beatty’s average payment time but is slower than the other six top-10 firms that have reported so far (Laing O’Rourke is due to report by the end of this month).

However, Mr Dew said the data on the payment practices site was skewed by Kier’s early payment facility.

Invoices filed through this are classed as 90-day payments for the purposes of prompt payment reporting, he said, but suppliers can access their money for a fee of “one-and-a-bit per cent” after 21 days.

“Our guys receive their money quite a lot quicker than 54 days,” he added.

The finance director said that “two-thirds of our payments in construction go out in around 21 days” through the early payment facility, which represents around £60m a month.

Using the facility is voluntary and involves a variable percentage fee of just over 1 per cent.

“The supply chain value it hugely,” Mr Dew said of the facility.

Asked whether he was satisfied with this performance or wanted to improve it, Mr Dew said: “We’re consistent. I think that’s key.”

He added: “I’m not looking at fundamentally changing payment practices; for us it’s about being incredibly consistent.”

The government’s Prompt Payment Code, to which Kier is a signatory, states that firms should aim to pay suppliers in 30 days.

However, Mr Dew argued that the tier one model would no longer work if the government forcibly mandated such payment terms.

“The model within the UK has been for the last 10-15 years that contractors make a very thin margin, but normally the main contractor maintains a balance of cash and can do other things with that,” he said.

“If the cash dynamic changes, then the model will have to change as well.”

Project bank accounts, where money is controlled by a third party, have been proposed as a way to speed up payment.

Mr Dew said this approach only worked for main contractors in sectors where margins were higher, such a major civils work, with the benefit of the higher return offsetting the cost of having less cash on the balance sheet during a project.

Kier has been targeted by short-sellers in recent months and Mr Dew said the firm is focused on showing the market “we control the debt, the debt doesn’t control us”, as CN reported on Monday.

He said he did not expect much improvement in the short position until there was more certainty around Brexit.

Tell us your experience of payment practices

Kier FD: 'We're not looking to change payment practices'

Readers' comments (7)

  • ‘Our supply chain value the EPF and it’s voluntary’. Two untruths. Who on earth would want to pay ‘one and a bit percent’ just to get their own money? Supply chain will also tell you that the EPF is mandatory on large orders from Kier.

    I hope there is another instalment in this comedy series. So many nonsense cliches thrown out.

    Unsuitable or offensive? Report this comment

  • Having represented an SME for a number of years, It is my opinion that the comments by Mr. Dew actually bear no resemblance to the Kier most sub contractors work for. Issues that regularly occur:
    Kier project teams given limited sums of money to spread across a contract payment run leaving some contractors paid short for almost no reason or "missed" off the run.
    Kier do not pay at all in the last month of their financial year as part of a cash farming exercise ahead of annual accounts.
    Kier will regularly use "outstanding" amounts as leverage against sub contractors to force a beneficial settlement.
    Keir Highways are worse than the construction arm of the business but with the exception of Galliford Try and Ferrovial, they are still one of the worst out there.

    Unsuitable or offensive? Report this comment

  • The finance director said that “two-thirds of our payments in construction go out in around 21 days” through the early payment facility, which represents around £60m a month. Using the facility is voluntary and involves a variable percentage fee of just over 1 per cent.
    “The supply chain value it hugely,” Mr Dew said of the facility.

    I wonder if he has to use the EPF, to access his wages at the correct time each month or does he wait 54 days?

    I do find all these companies, not just Kier, that laud their EPF facilities as a good system would be happy if they had to use it to access their money for services and goods supplied?

    Unsuitable or offensive? Report this comment

  • Bev Dew - your attitude stinks!

    Unsuitable or offensive? Report this comment

  • Yes Kier, you are "incredibly consistent" and you should be thoroughly proud of yourselves for consistently being one of the two worst payers in the UK. And congratulations on your arrogance as well!

    Unsuitable or offensive? Report this comment

  • As a PR exercise, this interview was a disaster. True colours shining through, unfortunately for Kier.

    A perfect example of the bad attitude and practices in the industry, and the arrogance in attempting to justify it.

    Unsuitable or offensive? Report this comment

  • Late payments and subbie bashing are back with a vengeance. It's like it's the 1980's again.

    Unsuitable or offensive? Report this comment

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.