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Government Could Grant Late Payment Court Powers to Trade Bodies

The UK Government looks likely to give trade bodies the power to challenge late payments and unfairly long payment terms set by large contractors. This is welcome news in the same week which saw the Specialist Engineering Contractor’s Group (SEC) release a manifesto detailing the construction industry’s biggest priorities. Tackling rife late payment by big, powerful contractors was right at the top of that list.

According to the SEC Group’s business department: late payment is more of an issue in construction than in other sectors”. When big contractors delay payment, or bully smaller providers with lengthy payment terms, unnecessary costs accrue within projects, creating significant waste. The causes of this are numerous, but poor transparency when it comes to cash flow, long supply chains and under-capitalisation in big companies are all partly to blame.

What’s the solution?

Well, according to the Group, there are a number of ways in which the all-too-prevalent late payment problem can be cured. They have approached the Government, advising them that more widespread use of project bank accounts and digitised processes which make auditing and monitoring payment practices easier would significantly improve the situation.

Whether Government acts on these suggestions remains to be seen, but Vince Cable’s announcement that new powers for trade bodies  this week demonstrates that Whitehall may finally be listening to the furore surrounding late payment – in the construction sector at least.

The proposed new powers would give trade bodies more potent powers to challenge late payments and unfairly long payment terms on the behalf of their members. It is hoped that these measures could step in before contracts are signed, giving the little guy more confidence and legal backing to insist on more reasonable payment terms.

What is “late”?

New guidelines will provide even more clarity on the issue. Previously, what was considered to be an unfair payment term was a grey area. Now the Government will classify payment terms which extend beyond 60 days as “grossly unfair”.

Do you think the proposed new measures will make a difference to the industry? Has your business suffered as a result of endemic late payment in the construction sector? Share your opinions and experiences with other tradespeople below.