Proposals by the new business secretary, Sajid Javid MP, to combat late payments to small firms have been cautiously welcomed by the Federation of Master Builders (FMB).
Brian Berry, chief executive of the FMB, said: “Late payment has plagued the construction industry for far too long and I am, therefore, pleased that the new business secretary will be bringing forward legislation to tackle the problem in next week’s Queen’s Speech. Late payment by larger firms is a major barrier to small and micro firms forming part of the supply chain for public sector contracts – if we can solve the problem of late payment, we will also open up public sector construction to thousands of construction small to medium businesses. As two-thirds of all construction apprentices are trained by micro-firms, this will have untold benefits for local jobs and growth.
“The last government made some small steps in the right direction in terms of late payment – for example, a new duty to report on payment terms will be imposed on all large firms from April 2016 and we hope this will help improve the situation through increased transparency. However, let me be clear – there is much more to do. At the end of last year, the FMB and National Specialist Contractors Council published research which showed that more than 90% of small construction firms agree contractual payment terms with their clients of 45 days or fewer but only 57% of members actually receive payment within those terms.”
Berry concluded: “Javid has also touted the idea of widening the powers for representative bodies to act on behalf of their members to challenge grossly unfair payment terms. We eagerly await further details on this as it is often difficult for small firms to highlight poor payment terms directly without biting off the hand that feeds. This is partly why the problem has raged on for so many years.”