Research reveals average pay delay of three weeks

Payments to construction firms were an average of three weeks late last year, research by Experian has revealed.

It is the second year in a row that payments have, on average, been 21 days overdue.

The research, covering public and private sectors, underlines the crippling effect on contractors as clients keep the purse strings tight.
Industry figures called on clients and main contractors to improve payment processes or see firms go to the wall.

Rudi Klein, chief executive of the Specialist Engineering Contractors’ Group, said: “This is desperately awful news when you consider these delays are coupled with really long payment periods in the industry.

“This increases the risk of insolvencies and of course can cost developers even more money when projects are disrupted.”

This week Defence Estates became the latest government body to confirm it will use project bank accounts on all future developments.

In November the government made the use of project bank accounts a requirement of public construction projects and it is now pressing all public bodies to do the same. So far 12, including Crossrail, have adopted the payment model.

Project bank accounts allow clients to pay all contractors and subcontractors directly from a single pot, eliminating payment disruptions down the chain.

Adoption of the Construction Act, due in October, is also set to improve payment terms and effectively outlaw retentions.

Klein said: “All these initiatives are really make or break for the industry. Late payment is a massive issue for our sector. If we address this cancer effectively we’ll have a healthier industry.”