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Exclusive: Third of contractors face 60-day payment waits, survey reveals

More than a third of main contractors, subcontractors, clients and consultants are paid more than 60 days after issuing invoices, according to a survey shared exclusively with Construction News.

The research by software provider Textura Europe asked construction firms how long they typically took to pay suppliers and how long they waited to receive payment themselves.

More than a third – 35.8 per cent – of respondents said their average wait for payment was more than 60 days after an invoice was raised.

Among main contractors, 34.2 per cent said they waited more than 60 days, with 15.8 per cent waiting in excess of 75 days.

For subcontractors, over a quarter (26.9 per cent) said it took on average more than 60 days to be paid, while around the same proportion took 60 days to make payments themselves.

Even more main contractors (36.8 per cent) took in excess of 60 days to make payments, with 18.4 per cent admitting to paying more than 75 days after receiving invoices.

Across all 109 respondents, 11.9 per cent claimed that payment usually took more than 75 days to be received, with half of that group saying they waited longer than three months, on average.

The survey suggested SMEs were continuing to experience difficulties resulting from late payment, with one firm stating it would consider offering a 75 per cent discount in return for receiving payment within 30 days.

One subcontractor claimed: “Almost all main contractors pay late without justification and poor payment practices are getting worse not better.

“No one seems to be willing to tackle [the problem] and they get away with what amounts to fraud day in, day out. Then they have the nerve to ask us to sign non-corruption forms.”

Late payment has been cited as a factor affecting a number of companies that have fallen into administration in recent months.

In the first half of 2015, 133 construction firms went into administration, according to Deloitte.

A chief executive at one specialist contractor told Construction News: “Large contractors are undercapitalised and the result is they’re trying to make money using supply chain finance.”

A supply chain director at a major contractor said more could be done by all sides to remedy the problem.

He told Construction News: “The amendments to the law to counteract late payments are not used very much. Suppliers choose not to use the tools available to them. But the question is: are those tools fit for purpose?”

The majority of respondents (69.7 per cent) were in favour of the Prompt Payment Code, with one distributor saying it should be mandatory.

The PPC is a voluntary initiative administered by the Chartered Institute of Credit Management that ensures signatories pay suppliers on time, give clear guidance to them and encourage good practice throughout the supply chain.

The supply chain director, however, argued that the PPC did not look at the big picture.

“The PPC is about having contractual teeth but the problem is, it doesn’t have any. The issue being avoided is that there are no ramifications for late payment.

“It isn’t going to stop subcontractors in financial difficulty paying their suppliers late. But what I think isn’t in line with what the government wants me to think.”

One transport infrastructure finance adviser also questioned the effectiveness of the code, asking: “Who will ever enforce [the code] as this has not happened in 50 years?”

A number of respondents agreed, acknowledging that while the PPC made it clear how payments should be made, its voluntary nature undermined its effectiveness.

One subcontractor said the code needed “better policing” on public sector contracts.

“The government should audit how fast their contractors are paying their suppliers rather than just take their word for it,” they stated. “Subcontractors shouldn’t be forced to pay a premium.”

Last year, the Construction Leadership Council industrial strategy established a charter demanding payment terms of 30 days, but this has yet to be supported by legislation.

Readers' comments (6)

  • Stuart Howie

    To my own knowledge over the last 30 years late payment has been the main cause of construction companies going to the wall!

    Long past the time when both clients and main contractors should be legally obliged to make payments by the contractually obligated due date. Failure to do so should also carry heavy financial penalties for delay in payment. These should also be immediately imposed by Law rather than through expensive and time-wasting litigation.

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  • Where is the Government Law in all of this they promote assistance to SMEs but nothing is ever as it is said just like their mortgage and loans offers they are all false with hidden rules.

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  • Ladies and Gentlemen, fellow Sub contractors, please take a moment in your busy lives to understand the Housing Grants, Construction and Regeneration Act 1996 - Part II Construction Contracts - 'Payment' Sections 109 - 113 and 'Supplementary Provisions' Sections 114 - 116. These couple of pages are readily available on the internet now, and I can honestly say will be your best read for getting paid properly and promptly! I would advise researching before you sign any Main contracts and don't be afraid to refer to the act and have your sub contracts adjusted to reflect the Act accordingly! The Main Contractors are still pushing their luck every single day because of our lack of knowledge of this Act.... Best bed time reading I ever did, hope it helps ... Good luck

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  • Without trying to sound naïve, is the point not that if we do the job we are contracted to carry out we should simply get paid.
    This stance by main contractors has made the whole process unnecessarily confrontational and results in deterioration of relationships as well as potentially the loss of jobs and livelihoods.
    If the banks acted as the contractors do the whole country would be up in arms against these immoral and crippling practices.
    Something needs to change and quickly.

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  • Despite endless lobbying on the matter, I just dont think Government is where the solution lies. I am admittedly biased here, but what I genuinely believe is missing from how we are tackling the issue of late payment is technology.

    It’s all very well signing up to the principles of fair payment, but when there simply isn’t the payment platform to facilitate the requisite visibility and collaboration between the main contractor and the supply chain, these principles can only go so far.

    It’s time we ‘digitised’ the payment process (this is a view supported by the SEC Group - http://www.prnewswire.com/news-releases/textura-europe-gains-backing-from-contractor-trade-groups-bes-and-sec-group-300105887.html ).

    It’s time that we move away from the world of applications for payment hiding in QS’s drawers, the laborious re-entry of data, the battle of the forms and the ‘paper chase’ that is the Construction Act - to a world of an online, transparent payment portal that lets everyone know where they are in the process.

    It’s about having a consistent, repeatable process and once that’s in place, PBA’s are easier to administer, Supply Chain Finance becomes more effective and adherence to the principles of fair payment becomes demonstrable, not lip service.

    Sounds utopian? It’s already here.

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  • The answer for subcontractors is for all of us to simply refuse to work for these companies under these ridiculous terms. 14 days is enough for most small SMEs to wait when their labour is paid weekly and even then you are financing a much larger company for 4 weeks. Having to wait 60 days or more must mean that these large companies would be insolvent without the use of your money, you are giving them vast amounts of credit for free, and then they want you to pay them to get paid quicker! Madness, but while we put up with it nothing will change.

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