Ceiling, drywall and plastering contractors are owed millions in unpaid invoices by main contractors, according to new research from FPDC.
A sample survey of FPDC members involved specialists quantifying their outstanding debts and detailing examples of where main contractors were either avoiding or evading payments.
The report found that there has been a noticeable change in the terms and conditions main contractors insist their subcontractors accept as ‘standard payment’. Five years ago most main contractors were operating on terms of 30 to 35 days. Now it is rare to see ‘standard terms’ less than 45 days, with 60 plus not unusual.
The survey results are being presented to ministers this month as part of a campaign to change attitudes to payment.
Paul Jessop, FPDC’s chief executive, said: “No-one is forced to work for any main contractor but, in reality, in this market they all seem to be doing the same, so what are the options?
“One main contractor is stating payment will be made after 45 business days. In reality this is 63 days and the terms could quite easily be missed by an inexperienced contractor.”
The report suggests that the banks’ reluctance to extend credit is insignificant when compared to the practice of main contractors’ late payment and the impact on the cash flow in the supply chain, which has seen more than 5,000 contractors become insolvent since September 2010.
Paul Jessop continued: “While main contractors stifle payment in a contractually correct way there are also blatant refusals to pay. One leading listed company does not tend to pay in the month before their half year results and then again one month before their full year results.”
A Cabinet Office spokesperson said: “It is already a condition of every central Government contract that sub-contractors are paid within 30 days. Any companies experiencing problems with payment on public sector contracts, either directly or through the supply chain, can use the Cabinet Office Mystery Shopper scheme to make an anonymous complaint and trigger an investigation by the Cabinet Office. This applies to contracts for both central Government and the wider public sector.”
Rudi Klein, chief executive of the Specialist Engineering Contractors’ Group, said: “This kind of behaviour [late payment] is widespread and should be condemned. Small businesses and the people they employ are being put in jeopardy.
“We must ensure that monies owed go into protected bank accounts. More and more clients are talking about introducing project bank accounts and their increasing use shows that they are suitable for any type of contract.”
In construction, over £1.1 billion worth of projects have already been signed up to use Project Bank Accounts and this is expected to rise to £4 billion by 2014. The Government announced on 9 March 2012 that it was looking at rolling out Project Bank Accounts to other sectors, such as facilities management.
SMEs working on public sector contracts can access the Mystery Shopper feedback service at www.cabinetoffice.gov.uk/form/mystery-shopper-feedback-form and raise any issues with payment.