49
PRO INSTALLER OCTOBER 2015
PRO BUSINESS
@proinstaller1
SPECIALIST CONTRACTORS PROP UP
CASH STRAPPED CONTRACTORS
Subbies continue to finance the multi-million pound players.
Specialist Contractors are
propping up the UK’s cash
strapped construction industry and financing growth by
acting as trade creditors to
the large main contractors.
According to StreetwiseSubbie,
a professional services organisation founded to support and
advise Specialist Contractors, the
financial landscape for UK subbies
remains bleak. Not because of
lack of work, but because certain
main contractors find every way
possible to delay payments, and
pay less than is owed, simply to
free up their own cash flow.
Barry Ashmore, co-founder of
StreetwiseSubbie and former
electrical contractor turned professional construction law expert,
explains: “By paying less than is
owed and withholding payment
for up to 120 days in some cases,
some of the UK construction
industry’s main contractors are
using the money they owe subcontractors to finance their own
business growth, it’s just plain
wrong.
“Not only is this practice unfair
and unjust, it is destroying the
heart of the industry and literally
biting off the hand that feeds it!
As a direct result of late and withheld payments, six construction
firms are going bust every day,
according to the Office of National Statistics. That is scandalous
and the pathetic attempts to fix
the problem such as the Construction Leadership Council’s voluntary agreement where signatories
agree to pay all suppliers within
30 days from 2018 amounts to
putting a sticking plaster on a
gaping wound.”
Ashmore continues: “Specialist
Contractors are consistently told:
‘accept our onerous terms or you
don’t get the work’. Accept crippling payment terms or lose out
on the business? That’s what I call
a real rock and hard place. Our
subbies have nowhere else to go
and no other choice but accede;
it’s a disgrace.
“The evidence is clear and it’s
not just the team here at StreetwiseSubbie that is concerned.
BIS Research Paper Number 118
‘Trade Credit to the UK Construction Industry: An Empirical
Analysis of Construction Contractor Financial Positioning and
Performance’ from July 2013
stated as one of its conclusions:
‘Tier 1 firms (main contractors)
were found to be net receivers of
trade credit, whereas Tier 2 firms
(subcontractors) were found to be
large net providers of trade credit.’
‘51% of SMEs are waiting more
than 30 days for payment’
In other words, it is highly likely
that trade credit flow from Tier 2
to Tier 1 contractors substantially
exceeds in size the trade credit
flow from suppliers outside the
construction industry to Tier 2
contractors,” adds Ashmore.
“Furthermore, in the last few
days, the SME Confidence Tracker
Report from Bibby Financial Services revealed that the number of
SMEs suffering from late payment
rose by nine percentage points in
the second quarter of 2015 against
the same period in 2014. As a
result, 51% of SMEs are waiting
more than 30 days for payment.
And, guess what? The construction industry remains the worst
culprit with 55% of smaller firms
waiting over 30 days to be paid,
up 11 percentage points against
the same period last year.”
Ashmore concludes: “We’re going backwards in this country and
the government and industry lead-
ers know what is going on but
don’t seem to be doing anything
about it. Talking about “working
towards” paying in 30 days by
2018 is an insult which is exposed
by the following clause taken
from a standard sub-contract form
in widespread use in 1971:
“The first payment shall be due
no later than one month after the
date of commencement of the
sub-contract works or if so agreed
of off-site works related thereto
and further interim payments shall
be due at intervals not exceeding
one month calculate from the date
of the first interim payment. Interim payments shall be made not
later than 14 days after the date
they become due.*
“If we could agree to pay within
14 days 44 years ago, why can’t
we pay within 30 days today?
Take the Specialist Contractor’s
money out of the UK construction
industry and it would be on its
knees within a matter of days.”
*Form published by BEC Publications – 1971edition, revised
July 1978. Form approved by:
The Building Employers Confederation, The Federation of
Associations of Specialists and
Sub-Contractors and The Committee of Associations of Specialist
Engineering Contractors.
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