October 29, 2020

Construction industry awaits results of Prompt Payment Code consultation

News Article

Businesses operating in the construction and engineering sector are awaiting the outcome of a Government consultation, which is proposing stricter payment rules.

The Department for Business, Energy and Industrial Strategy (BEIS) ended its consultation in October but has indicated that it wishes see the Prompt Payment Code (PPC) further strengthened.

If the proposals are given the go-ahead, all signatories to the PPC would be expected to commit to settle 95% of invoices to smaller businesses within 30 days, and to pay 95% of invoices from all other suppliers within 60 days.

Under the existing terms of the Code, signatories only need to pay their suppliers on time, within the terms stipulated at the start of the contract.

The consultation is also investigating whether it is possible to measure payment compliance by the percentage of invoices paid to terms and the average time taken to pay invoices.

Around 300 organisations signed up to the PPC during the Covid-19 pandemic and BEIS, has indicated that it sees the further tightening of the Code’s rules “as a key lever in improving payment practices across companies and organisations of all sizes”.

Adam Davis, a Partner in Palmers’ Construction team and a Construction Disputes Adjudicator, said: “This is welcome news, given that good cash flow is the lifeblood of commercial construction projects. Any initiative which helps to protect small businesses and sub-contractors from the burden of late payments and bad debt is a positive step.

“Late payments often build up rapidly and can quickly have disastrous consequences. A ‘culture change’ to combat the crisis of late payments is long overdue and we can only hope that the proposals are put into action as swiftly as possible.”

Adam added: “Palmers provides a debt recovery service and a fixed-fee adjudication scheme that is straightforward, effective and can help your business deal with its invoice debts quickly and efficiently.

“Such services are vital at a time when there appears to be no end in sight for the late payments crisis.”

For more information about how Palmers can help, or to find out more about our Debt Recovery and Fixed-Fee Adjudication Scheme, please contact us.