“Cash flow is the lifeblood of the construction industry.” So said Lord Denning in 1971, and the demise of Carillion provides a harsh reminder of this universal truth. Much of the recent public focus has been on the supply chain, with outrage over retentions abuse and the promotion of the Aldous bill attracting much air time and space in this and other media outlets.

But main contractors also need to be paid. It is cash from the employer that “oils the wheels” and, in an increasingly risk-averse climate, contractors are looking to protect themselves against the risk of non-payment by their client. This is especially true where the employer is a special purpose vehicle (SPV), an overseas entity or is otherwise unable to demonstrate its creditworthiness. 

Of course, contractors already have a number of statutory and other rights if they are not paid on time. For example, they may suspend work, claim interest, commence adjudication and ultimately terminate the contract. However, these are all “after the event” remedies and none guarantees payment if, for example, the employer becomes insolvent. 

…