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Construction Act payment changes will damage SMEs

The Specialist Engineering Contractors’ Group is set to hold talks with the construction minister over fears that the new Construction Act could damage small and medium businesses.

Payment changes will damage SMEs

The Specialist Engineering Contractors’ Group is set to hold talks with the construction minister over fears that the new Construction Act could damage small and medium businesses.

The Local Democracy, Economic Development and Construction Bill was highlighted in the Queen’s Speech and aims to ensure prompt and fair payment practices throughout construction supply chains and better enable the industry to adopt integrated working.

SEC Group chief executive Professor Rudi Klein will meet Ian Pearson next week, highlighting a clause relating to payment notices.

Professor Klein said: “The Bill gives the payer the option of issuing the payee with a notice for a certain amount and then allows them to issue a second notice with a different amount.”

Mr Klein believes this provision could be damaging to SMEs. In relation to payments he will also tell Mr Pearson that payers who want to reduce payments should be obliged to give payees sufficient notice before the due date to allow greater time to plan cashflow.

Professor Klein added: “We will be scrutinising every word of this Bill. We’re in difficult times and need to do everything we can to help SMEs.”

SMEs make up 60,000 members of the SEC Group and according to the department for business, enterprise and regulatory reform SMEs account for 99.9 per cent of firms in the construction industry.

Other parts of the bill, including the outlawing of conditional payments, have been welcomed by the industry.

But the Construction Confederation has also warned that payment provisions announced could prove to be a burden to the industry.

Construction Confederation chief executive Stephen Ratcliffe said: “Far from reducing costs, proposals to include verbal contracts within the legislation will only serve to make adjudication over disputes a lengthier and more costly process.”