June 9, 2015

Builders back moves to tackle late payments

The Federation of Master Builders (FMB) has welcomed government proposals to tackle late payments to small firms but says there is “much more to do”.

The Queen’s Speech on 27 May, which set out the new Conservative government’s proposed legislative programme, included plans for a new Enterprise Bill, under which Small Business Conciliation Service would be set up to help resolve business-to-business disputes without the need for court action, particularly over late payment.

Speaking earlier in May, new Business Secretary Sajid Javid said late payment was set to cost British businesses more than £40 billion this year, with the average amount owed more than £30,000.

FMB chief executive Brian Berry said: “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 SMEs.

“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 NSCC (National Specialist Contractors Council) published research which showed that more than 90 per cent of small construction firms agree contractual payment terms with their clients of 45 days or fewer but only 57 per cent of members actually receive payment within those terms.”

For construction projects covered by the Housing Grants, Construction and Regeneration Act 1996 (as amended), a “pay now, argue later” mechanism offers the option of fast payment via adjudication. With adjudication typically a 28-day process, this can be a very effective approach in obtaining payment where the contractor has not issued a pay less notice.

Legal costs relating to adjudication are not recoverable but Palmers offers fixed fee adjudications for all debts under £100,000.

Where this option is not appropriate, we can advise construction companies on deciding which procedure is most likely to result in the recovery of the money owed, with a fixed fee appointment of up to one hour costing £150 + VAT to assess the case and advise on options. For more information on these issues, please contact Adam Davis.

If businesses are facing financial challenges so severe that there is the potential for insolvency, our insolvency specialist Andrew Skinner is able to provide expert advice.