Industry welcomes fair payment bill

UK: The industry has welcomed the small business protection (late payment) bill announced in this week’s King’s speech.

The legislation would remove the scourge of late and retention payments, which has undermined construction supply chains for years.

According to the government, late payments cost the UK economy £11bn per year and leads to the closure of 38 small businesses every day.

The legislation empowers the Small Business Commissioner to fine large firms millions, enforce a 60-day maximum payment cap, and mandate 8% interest on late invoices.

The government has also pledged to take specific action to remove the widespread practice of deducting and withholding retention payments in the construction sector, which often wipe out SME and sub-contractor profit margins.

“This is a historic day in our long battle against late payment and regressive practices in construction,” commented Debbie Petford, BESA’s director of legal and commercial. “There have been a series of voluntary codes of conduct and pledges from big businesses to mend their ways over the years, but we always felt that only proper, targeted legislation would really get to grips with the problem.

“Late payment and retention clauses in contracts lead directly to business failures, job losses and poor quality buildings that directly impact health, wellbeing and safety.”

She said it was now crucial that the government kept up the momentum and moved to a second reading of the bill so that it could become law and start providing protection for thousands of hard-pressed firms struggling to cope with a series of challenges in the current economic environment.

Other provisions in the Bill include forcing persistently late paying companies to publish details of their payment practices and intended actions to address them. It will also give the Small Business Commissioner new powers to investigate and potentially fine businesses suspected of persistent poor payment and adjudicate disputes between businesses outside the court process.

“The government made this a key manifesto promise because of the regressive impact this has on employers all over the UK,” said Petford. “Late and unfair payment undermines business confidence and investment so this Bill can play a significant role in driving economic growth.”

Fiona Hodgson, chief executive of the Scottish and Northern Ireland Plumbing Employers’ Federation (SNIPEF), said: “For many plumbing and heating businesses, particularly SMEs, delayed payments and withheld retentions continue to place unnecessary pressure on cash flow, investment and apprenticeship recruitment.”