Leading construction body the Specialist Engineering Contractors’ (SEC) Group has welcomed the BEIS Select Committee’s report on Small Businesses and Productivity calling for SMEs in the supply chain to be paid ‘fairly and on time’ and recommending a statutory requirement for companies to pay within 30 days. The Committee identifies the construction industry as a sector where poor payment practices are rife and recommends urgent reform and action from Government particularly on the issue of cash retentions.
We agree with the Committee’s assessment of the little impact that initiatives such as the Prompt Payment Code and Construction Supply Chain Charter had and applaud the Committee’s recommendations to ensure signatories to such Code and Charter are effectively monitored. Like the Committee, we have also asked Government to strengthen the role of the Small Business Commissioner’s Office and ensure their remit covers construction.
SEC Group’s Chairman and industry practitioner Trevor Hursthouse OBE commented on the Committee’s analysis that it has accurately captured the systematic payment abuse for SMEs in the industry which has lead to disasters such as Carillion. He added:
“SEC Group has always campaigned for effective enforcement of the 30 days payment and wider use of project bank accounts, and we are currently working with BEIS and the industry to find an effective solution to the issue of retentions. This report is strengthening our call for reform and better Government scrutiny of payment conditions across their supply chains.”
Notes for Editors
- SEC Group (secgroup.org.uk ) is an umbrella body representing the largest sector in UK construction (by value). The specialist engineering sector comprises mainly SMEs. SEC Group members are: British Constructional Steelwork Association, Building Engineering Services Association, ECA -Electrotechnical and engineering services trade body, Lift and Escalator Industry Association, SELECT (Electrical Contractors Association of Scotland), SNIPEF (Scottish and Northern Ireland Plumbing Employers’ Federation) and Scaffolding Association.
- The House of Commons Business, Energy and Industrial Strategy Committee Report on Small Businesses and Productivity can be found here: https://www.parliament.uk/business/committees/committees-a-z/commons-select/business-energy-industrial-strategy/news-parliament-2017/small-business-report-published-17-19/
- Project bank accounts (PBAs) enable all firms in the supply chain to be paid out of one “pot”; instead of the cash having to travel through the various tiers of the supply chain. They are mandatory for public projects of over £4.1m in Scotland, and over £2m in Wales and Northern Ireland. In England, PBAs should be used unless ‘there are compelling reasons not to’. However, there is no mechanism currently that monitors their use or the decision not to use them.
- Cash retentions are monies withheld from due payments on construction works. They are deducted (ostensibly) as security in case a firm fails to return to rectify non-complying work. In practice they are deducted to bolster the working capital of the party deducting them. Almost £1m worth of retention monies is lost by construction SMEs each working day as a result of insolvencies up the supply chain.
- For further information please contact Professor Rudi Klein on 07767 412 903 (Email: Klein@secgroup.org.uk) or Maria Balermpa, SEC Group Operations and Public Affairs Manager on 07508 559 231 (Email: firstname.lastname@example.org)