Carillion shocks Mowlem suppliers with 65-day policy

Subcontractors on former Mowlem projects will have to wait twice as long as usual to be paid now the sites have been taken over by Carillion.

Building understands that Carillion has written to subcontractors on sites it is taking over from Mowlem to advise them that it is operating a 65-day payment policy rather than 35 days.

The switch has exposed the payment periods operated by Carillion, which claims that the policy is standard procedure on all its sites.

It has been strongly criticised by specialist groups, which fear it could force subcontractors out of business.

A director from one fit-out firm, which did not want to be named, said his firm was tendering for work on former Mowlem projects and had been informed of the policy at a meeting with Carillion. He said: "We find this outrageous. "

He added that the policy was likely to lead his firm to withdraw from contracts with Carillion. He said: "Bearing in mind that we pay our labour every two weeks and most of our suppliers every month this effectively means that we are financing the project for up to three months from the date of commencement on site."

The policy has also been attacked by trade bodies in the specialist sector, which have been campaigning for fairer payment terms for subcontractors under the Construction Act review.

Rudi Klein, chief executive of the Specialist Engineering Contractors Group, said he planned to raise Carillion's policy with the DTI. He said: "It is yet another example of the supply chain being used as a source of financing by main contractors, and shows payment malpractice is being carried out by even the largest companies."

A Carillion spokesperson said "Sixty-five days is about our standard. If that is the term agreed that is the term we will honour."

Carillion made an "unexpected" write down of £90m on Mowlem's assets in April in addition to an initial write-down of £45m after the takeover.