Government must act faster on late payment abuse – SEC Group

Aldous Bill, late payments, Project bank accounts, Rudi Klein, SEC Group, Small Business Commissioner
Rudi Klein

The Specialist Engineering Contractors’ (SEC) Group has welcomed Government efforts to address the construction industry’s late payments but is calling for further action – and faster.

The SEC Group, which represents the largest value sector in the UK construction, is positive about government’s commitment to change the culture of unfair treatment of SMEs and illegal practices but says there is still more to be done to ensure implementation and enforcement. This includes mandating the use of project bank accounts (PBAs) to ensure that retention monies are secured in a separate trust account or scheme.

Rudi Klein, the SEC Group CEO says: “We believe that Kelly Tolhurst (the Small Business Minister) is sincere in wanting a change in payment culture. We are pleased that she intends to act on the issue of cash retentions in absence of industry agreement on a solution [Kelly Tolhurst MP responses in House of Commons, 19/06/2019]. We also know that she is very sympathetic to the notion of project bank accounts (PBAs).

Statutory protection of retentions monies and mandating PBAs will transform the lives of the overwhelming majority of small firms in the industry. ”

Government is adopting the view that the role of the Small Business Commissioner should be strengthen with powers akin to the Groceries Code Adjudicator and taking responsibility for company compliance with the Prompt Payment Code. This is something that SEC Group expects to see more detail on during the forthcoming consultation.

However, SEC Group had hoped that BEIS would proceed further with mandatory Prompt Payment Code and reduce the maximum payment terms to 30 days (currently at 60 days), in accordance to the Public Contracts Regulations 2015.

SEC Group also agrees with the Government’s intention to bring greater transparency on how the supply chain finance is reported in company accounts, as this was something we had suggested as one of the lessons to be learnt from Carillion’s collapse. We will be following with interest the guidance developed by BEIS and the Financial Reporting Council.

Against a background of a worsening financial crisis in the construction industry (with the balance sheets of the largest construction companies showing increasing fragility) effective measures are now required to improve payment security.

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