Industry faces ‘perfect storm’ – SEC Group

SEC Group, Brexit, Carilion, insolvencies, reverse charge VAT, Construction Minister, Nadhim Zahawi
Nadhim Zahawi

The Specialist Engineering Contractors’ (SEC) Group is warning that the construction industry faces a ‘perfect’ storm of late or non-payment, reverse charge VAT and hikes in materials costs in post-Brexit Britain.

The SEC Group is particularly focused on dealing with the problem of late payment and has written to the Secretary of State for BEIS Andrea Leadsom MP and new Construction Minister Nadhim Zahawi MP to prioritise action on fair payment for construction SMEs.

Rudi Klein, SEC Group CEO, says: “We intend to seek meetings with Nadhim Zahawi and Andrea Leadsom as soon as possible to discuss BEIS priorities for payment reform. The re-appointment of Kelly Tolhurst will help ensure continuity in a very critical area of policy as far as construction is concerned. Our priorities now are to reinforce the case for legislation that ring-fences retention monies and mandates the use of project bank accounts for building works over £½ million.”

SEC Group is particularly concerned that in the wake of the Carillion collapse 20 months ago the expected progress in improving cashflow security for firms in construction supply chains has not materialised.

Last year there were over 3000 insolvencies in the construction industry, more than for any other sector of the UK economy. SEC Group believes that this figure is likely to be exceeded this year given the continuance of widespread payment abuse, the introduction of the VAT reverse charge on 1 October (which will reduce cashflow to SMEs) and the likelihood of increased material costs after Brexit.

SEC Group’s position is that the Government only needs to introduce legislation to mandate the use of project bank accounts and to protect cash retentions; this will make a significant difference to the prospects for the majority of construction SMEs.

Both Kelly Tolhurst (who was re-appointed as Small Business Minister) and former Construction Minister (Andrew Stephenson) were very keen to resolve the impasse on retentions.

During the course of a debate in the Commons on 19 June 2019 Kelly Tolhurst said: “With regard to cash retentions, I have been clear that if industry cannot come to a consensus on a way forward, the Government will step in and take action.”

Picture credit: Shutterstock/YuRiPhotolife

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