Trade federations send letter criticising poor payment practices

Trade federations representing more than 24,000 companies have written to the government urging it to dump contractors with a history of poor payment to their supply chains.

In an open letter to the department of Business, Innovation and Skills (BIS), 12 organisations together claim public sector clients are failing to ensure prompt payment to all firms working on public sector jobs.

The government has brought in a contractual obligation for all government contracts to pay down to tier three within 30 days.

But the trade federations – including the Specialist Engineering Contractors’ Group and the Federation of Master Builders – say barely 5% of firms in the supply chain report are paid within 30 days.

The letter also claims prompt payment policies are unaudited by clients and “the supply chain cannot enforce them due to the real danger of commercial reprisals that would further damage trading”.

The letter demands six actions from the government –

  1. Exclude from public sector works any firm which has a history of poor payment performance
  2. Legislate to require that all retention monies are put in trust
  3. Abolish pay when paid clauses that result in non-payment to the supply chain when the client goes insolvent
  4. Only appoint firms as lead contractors which are sufficiently capitalised to resource the project
  5. Ensure advance payments are made so that cash flow is available for firms which have to fabricate or assemble their product prior to delivery on site
  6. Increase the use of project bank accounts that secures the supply chain’s cash in a ring-fenced account

The other signatories are the Building and Engineering Services Association, the British Constructional Steelwork Association, the Electrical Contractors’ Association, the Lift and Escalator Industry Association, the Scottish and Northern Ireland Plumbing Employers Federation, SELECT, the Association of Plumbing & Heating Contractors, the Stone Federation Great Britain, the Association of Interior Specialists and

Last month BIS minister Michael Fallon warned he will name and shame FTSE 250-listed companies that fail to sign up to the government’s Prompt Payment Code.

Several FTSE 250-listed construction firms have so far signed up to the code – including Balfour Beatty, Kier, Skanska and Miller – but others including Galliford Try and Carillion have not yet done so.