Both Kier and Wates are considering introducing a ‘reverse factoring’ payment facility for subcontractors
Kier and Wates are the latest main contractors to consider the introduction of controversial supply chain payment systems that enable subcontractors to be paid early if they pay a finance charge to a bank.
The move by Kier and Wates to consider implementing a form of ‘reverse factoring’ follows ISG, Galliford Try, Willmott Dixon, and Balfour Beatty all confirming they are considering introducing the system.
It comes after Carillion introduced a form of the system earlier this year, which saw it extend its payment term to 120 days, prompting a barrage of criticism from industry experts and MPs who attacked its complexity and said it flew in the face of efforts to improve payment terms for SMEs in the supply chain.
Carillion has stated that no subcontractor would be financially worse off under the system.
Now Kier and Wates have said they are looking at a similar system.
Kier chief executive Paul Sheffield said: “We’ve looked quite carefully at it [reverse factoring]. We’re not using it currently and if we do we will be very, very careful who we use it with and only with people who want to use it.
“It can be a significant benefit. I’ve been talking to some subcontractors and they’re actually borrowing money to make their wage bill each week, and they’re borrowing money at a significantly higher cost than the cost of reverse factoring.
“So it could be a significant benefit to them if they want to use it constructively. But you don’t want to force it on people.”
A Wates spokesperson said: “The Wates Group are currently investigating a similar facility that would provide a greater amount of flexibility for our supply chain partners.
“In these current market conditions the main contractors liquidity should play an important part of any decision making process a supply chain partner should consider.
“Our current payment terms are within industry standard levels and the Wates Group this year became an approved signatory of the prompt payment code.”