The Specialist Engineering Contractors’ (SEC) Group has welcomed the Government’s efforts to address the practice of late payments and the commitment to change the culture of unfair treatment of SMEs and illegal practices, but it says there is still more to be done to ensure implementation and enforcement.
The Government has accepted that the role of the Small Business Commissioner should be strengthened with powers akin to the Groceries Code Adjudicator and take responsibility for company compliance with the Prompt Payment Code. SEC Group has strongly argued for this change and has said it will expect to see more detail on these proposals in the forthcoming consultation.
SEC Group had hoped that BEIS would proceed further with mandatory Prompt Payment Code and reduce the maximum payment terms to 30 days (currently at 60 days), in accordance to the Public Contracts Regulations 2015.
SEC Group supports the Government’s intention to bring greater transparency on how the supply chain finance is reported in company accounts, as one of the lessons to be learnt from Carillion’s collapse.
Against a background of a worsening financial crisis in the construction industry (with the balance sheets of the largest construction companies showing increasing fragility) effective measures are now required to improve payment security.
SEC Group believes it is now imperative that the Government legislates to mandate the use of project bank accounts (PBAs) and ensures that retention monies are secured in a separate trust account or scheme.
Rudi Klein, the SEC Group chief executive, said: “We believe that Kelly Tolhurst (the Small Business Minister) is sincere in wanting a change in payment culture. We are pleased that she intends to act on the issue of cash retentions in absence of industry agreement on a solution. We also know that she is very sympathetic to the notion of PBAs.
“Statutory protection of retentions monies and mandating PBAs will transform the lives of the overwhelming majority of small firms in the industry. ”