With late payment a major issue in the construction industry and a frequent problem for joinery businesses, we have formulated an industry response to the government’s discussion paper on the UK’s culture of late payment. The response was based on feedback from members, with a number of joinery businesses themselves responding to government.
Specialist contractors are often not paid until some time after the work is done, and it is not unusual for lower tier supply chain members to have to wait up to 100 days to receive payment. This harms cash flow and increases the reliance on borrowing. Late payment has been a major factor in the high number of insolvencies, including those of former BWF members.
The BWF's message urged a change in payment culture to ensure that the recovery will benefit all parts of the supply chain. Although major contractors are capable of working with the supply chain in a responsible way, there are currently too many incentives for that not to happen. Clear payment terms and monitored performance is crucial, with measures needed to punish persistent late payment offenders and reward good practice.
BWF Policy Executive, Matt Mahony commented:
“We need to see prompt action as payment terms are becoming even more complex and late payment continues to restrict business growth by hampering vital spending on machinery, product innovation and by causing further payment issues throughout the supply chain. The construction industry is decades behind other sectors in terms of payment practice and this is a vital opportunity to address the cultural issues at stake as noted in the joint Construction Industry Strategy.
“Unfortunately extended payment terms are incentivised as Tier 1 construction companies make profit from cash management by holding onto their clients’ money for as long as possible before paying their suppliers.
“After a seemingly moribund last few years, we are now seeing work pick up for many joinery businesses. Less in the way of platitudes and more in terms of action is necessary from both government and contractors to ensure that UK SMEs don’t lose out and the benefits of construction sector growth are not restricted to big contractors alone.”
The BWF is a strong supporter of the NSCC Fair Payment Campaign and is firmly of the view that limiting payment periods to a maximum of 30 days will help SMEs such as those manufacturing and installing joinery products to survive and grow, to the benefit of the UK economy.
BWF members needing advice on payment and contractual matters can use our free-to-members business support helplines which includes legal assistance from Wedlake Bell, and employment advice from Croner.
