Late payers blight building suppliers

The UK’s largest construction industry union has accused leading contractors of causing a rash of receiverships by making suppliers wait up to 120 days before payment.

The construction industry became caught up in the late-payment debate earlier this month after Accountancy Age named the building services companies with the worst payment record yet uncovered.

November’s Late Payment Act allows companies to charge 8% interest on unpaid bills after 30 days if no contract had been agreed. But Crown House took up to 120 days to pay suppliers for one quarter of last year, while Co-operative Wholesale Engineering had an average annual payment time of 93 days, according to an Association of Ductwork Contractors and Allied Suppliers survey.

Bernard McAulay, regional officer for the Amalgamated Engineering & Electrical Union, said major contractors were using smaller contractors for projects and delaying payment if the project overran.

‘Companies are falling like packs of cards because of delayed payment and it’s totally unacceptable,’ he said.

But one finance director at a medium-sized contractor, who asked not to be named, said contractors faced similar cashflow problems from giant contractors such as Tarmac.

‘Some suppliers will want to be paid within 30 days but if you go to the main contractor you probably won’t be paid in 30 days,’ he said.

A Tarmac spokesman said it was the company’s policy to pay suppliers promptly, but this was sometimes frustrated when clients decided to ‘constantly change’ specifications for the projects.

A spokesman for the Federation of Small Businesses said that the construction industry lagged far behind the UK’s average payment time of 49 days.

It has been compiling a survey on late payment times, but that survey is now likely to be delayed until mid-March.