Late Payment in the Construction Industry
Construction Index reports that “construction businesses are extending delays in paying suppliers, threatening the viability of thousands of companies”.
Business finance website Funding Options has calculated that it took an average of 42.2 days for invoices to get paid in the construction industry in the year 2017/18, up from 41.6 days in 2016/17 and 40.3 days five years ago. It said that “payment delays were contributing to a high level of insolvencies in the construction sector. In 2016/17 there were 2,633 construction businesses that went insolvent, rising 8% from 2,447 in 2015/16.
Statistics about insolvency rarely make good reading, but it seems even worse when the problems are caused by other businesses simply failing to act in accordance with their contracts. B2B business are covered by the provisions of the Late Payment of Commercial Debts (interest) Act 1998, which allows the creditors to be paid simple interest at 8% over base plus a one-off penalty fee on each debt, and the Housing Grants, Construction and Regeneration Act (as amended) permits the suspension of work (on seven days notice) for non-payment, together with re-mobilisation costs. But still late payment seems to be the norm, and getting worse.
Creditors need to be made more aware of their rights and their options. Too many small businesses assume that all they can do is go to court, and that it’s too expensive. It can be, there is no doubt, but straightforward debts can be recovered using the Money Claim Online system. Constructions disputes can be adjudicated, and it is possible for companies to do this themselves. But even more important is for businesses, particularly small ones, to read contract documents and, if unsure, to take advice. Contracts can be a mess, a veritable minefield, and sometimes it’s completely deliberate – bigger companies will work on the theory that smaller ones will just sign anything in order to get the job, and it’s only when it’s too late that the small companies discover that they haven’t got a leg to stand on
We offer a fixed-fee contract review service. We will look at the contract you’ve been asked to sign, and tell you if there are problems. If you want we can then negotiate with your client to remove those problems, or to reduce your risk. Our service is fast and we’re commercially-minded. We’ll tell you what’s a deal-breaker, what would be nice to have, and what will invalidate PI insurance. We’ll put the decision, and the control, back in your hands, but your decision will be an informed one.
For more information, please contact Derryn Rolfe, or you can give us a call on 0345 070 6000.