Michael Iapoce once said that “reputation is character minus what you’ve been caught doing”. This might raise a smile but it’s a very serious point and one that sums up nicely why we keep such a keen eye on the payment practices of the UK’s biggest construction contractors.
As you probably know, under government legislation passed last year, all large UK companies now have a duty to report on their payment policies, practices and performance. This means that if a company or LLP exceeds at least two of the following criteria then they must report their information within 30 days of each six month period (aligned with the company’s own key financial reporting dates, such as a year end).
- £36m annual turnover
- £18m balance sheet total
- 250 employees
With companies reporting at different times, the league table of poor payers is constantly changing but many of the names make a regular appearance in this rogues gallery of poor payers.
|Contractor||% of Invoices not paid within agreed terms||Average Time Taken to Pay Invoices (Days)|
|John Sisk & Son||64||52|
|Sir Robert McAlpine||28||35|
*Data as published on Build UK website
Looking at the lower end of the table, it’s not unreasonable to think that paying 11% of invoices outside of contract terms represents exceptions to the rule rather than a pattern of poor behaviour. On the other hand, as in the case of Interserve’s whopping 83%, if the majority of invoices are being paid late then this is simply not acceptable.
How do they get away with it?
Quite simply, because they can. In other words, too many subcontractors assume they have no choice but to accept this type of unethical behaviour and therefore these poor payment practices continue to go unchallenged.
To address this apparent imbalance, let’s look at some of the myths which lead to subcontractors routinely accepting late and/or reduced payment.
Myth: I need to accept the contract terms offered if I want to do the work, so I may as well just sign it and get on with the job.
What’s the point carrying out work if you end up losing large sums of money? Even if you decide not to challenge the terms of the contract, at least make sure you understand the risks involved and take steps to minimise the chance of late or reduced payments.
Myth: I can’t properly assess contract risk without employing an internal legal team or using expensive external lawyers
Our traffic light contract assessment service is a quick way to identify potential risk areas and our training programmes are designed to educate non legally trained directors and managers on the key things to look out for when reviewing a contract terms.
Myth: It’s worth accepting a reduced amount to keep my business afloat and future projects funded.
Recent court cases such as the one between Imperial Chemical Industries (ICI) and Merit Merrell Technology (MMT) shows that withholding payments to force a cash crisis will not be tolerated by the courts.
Myth: Taking action against a valued customer will mean losing future business
Having won well over 500 adjudications, our experience shows that main contractors continue to work with subcontractors that have bought multiple actions against them. This is because they recognise the quality of the work done and accept that you are only trying to enforce the terms of the contract they wanted you to sign in the first place.
Myth: I simply don’t have the time or money to continually take payment disputes to adjudication
Adjudication is not the only tool to ensure full and timely payment. In fact, we work with subcontractors of all sizes to help them change working practices so as to reduce the chance of a payment dispute occurring in the first place.
Want to know more?
If you would like to know more about how to get paid in full and on time, why not join our team of experts on 21st March as we look at how recent cases now mean that new strategies and working practices are needed to protect subcontractor profits. You can book your free place now by visiting: pjeint.pre-live-6.rfnm.co.uk/protecting-profit-event