With our construction supply chain under pressure, I read with great interest your article “Out of credit” (27 February, page 20)
However, I have noticed a distinct lack of commentary on the role of the client in the financial food chain.
Although the government is trying to inject cash into the economy through construction expenditure, it does not seem to have grasped the importance of getting that cash all the way down the supply chain and into the hands of Bob the Builder.
The current financial circumstances have the potential to create a new paradigm: why not pay the builder on completion of its work (or stages in its work)? Cash-based clients have a fantastic opportunity to take the bank out of the equation almost entirely, and generate added value to the supply chain, some of which would be reflected in the price to the client.
Furthermore, a more lateral review of subcontractor and supplier relationships will generate the potential to spread the benefits of client-supported cash flow quickly and effectively.
The government does not seem to have grasped the importance of getting cash into the hands of bob the builder
The reason so many will find it a struggle to accept this view is that under the current paradigm the relationships of trust are not there and nor is the cash flow available to allow the builder to do that … BUT, if you can break the cash flow trap you can then break the reason why the builder struggles to respond to defects, and so on.
Easy, isn’t it? Who wants to be first?
Michael Lawton, managing director, Trinity Solutions Consultancy