Rudi Klein, CEO of SEC Group, urges action on payment abuse
Members of the construction sector should be contacting their MPs with a message that demands attention:
Unless MPs support legislation to enhance payment security for SMEs in construction the industry will continue on a downward spiral of declining investment in jobs and skills and of falling standards and quality. In contacting the new MPs we should not hold back. They should understand that SMEs create the bulk of the industry’s value and the future survival of many of these companies depend on MPs supporting measures to ensure that they are paid.
Insolvencies in the construction industry are running at their highest rate since the recession.
Over 30,000 SMEs in Carillion’s supply chain lost monies when Carillion collapsed in January 2018.
The Business Select Committee in the House of Commons concluded that Carillion had treated them with “contempt”.
As I was writing this article the news filtered through that Wetheralds, a Leeds-based specialist painting and decorating contractor, had been forced into liquidation by a string of main contractor bad debts. The company had worked on a large number of high-profile jobs across the UK over the 33 years of its existence.
The final blow for this firm was the loss of £150,000 for work done for the Simons Group which went into administration last October. This came on top of £911,000 worth of unpaid work for the Shaylor Group which went into insolvency in summer 2019. One of Wetherald’s directors said:
“We’ve never seen anything like this in all our years of business … bigger firms are a law unto themselves now. Pay less notices and major firms not paying are driving good firms out of business.”
This is a picture that is reflected in the four corners of the UK. Earlier in 2019 Dundee-based building services company McGill & Co. collapsed with the loss of 425 jobs. This company had been trading since 1981. Its administrators blamed delays in payment on a number of significant jobs. In Northern Ireland an M&E contractor,
Blackbourne Ltd, went into insolvency in September 2019. Blackbourne operated across the UK. One of the causes of its insolvency was the Carillion collapse. In March 2019 Wales suffered its own version of the Carillion collapse; main contractor Dawnus went bust with almost £40 million left owing to its sub-contractors.
Getting The Message To MPs
Every company needs to make these problems known to MPs. Draw on your own experiences of payment abuse. How many are made late? How many payments are for amounts that are less than the amount applied for? Have you lost significant sums as a result of insolvencies? Remember:
ON PUBLIC SECTOR PROJECTS TIER 1 CONTRACTORS (UNLIKE THEIR SUBCONTRACTORS) DO NOT CARRY ANY INSOLVENCY RISK: PUBLIC BODIES DO NOT GO INTO INSOLVENCY.
Always emphasise the broader impact of payment abuse. It is a substantial cause of mental health issues amongst business owners and senior employees which, in turn, has repercussions for family relationships.
Also, poor payment practices help drive poor behaviours which, in turn, drive poor quality (according to Dame Judith Hackitt, who produced a report in May 2018 on improving building safety following the Grenfell tragedy).
SEC Group have created a template letter that you can easily personalise and send to your MP.
Email firstname.lastname@example.org today to have this letter sent to your inbox.