The Builders Merchants Federation (BMF) has greeted news of a new construction payment charter proposed by members of the Construction Leadership Council (CLC) as a welcome first step, but fears it is unlikely to work unless it is backed by enforcement and mandatory disclosure of corporate payment practices.
The CLC charter appears to commit clients and main contractors who sign it to pay all suppliers within 60 days - immediately reducing to 45 days from June 2015 and 30 days in January 2018. The voluntary charter also commits to work towards abolishing retentions by 2025.
However, with the final version due to be published later this month, the BMF is urging the Institute of Credit Management – which is set to lead the work on monitoring arrangements - to renew its efforts to promote, explain and enforce the code.
BMF managing director John Newcomb said: “We would like to see this important issue elevated to board level, requiring mandatory disclosure of corporate payment practice as part of the Auditor’s Report.
“Late or non-payment is along standing issue in construction with some main contractors moving to 120 days as a default position. While the intent behind the CLC charter is a useful first step, it is disappointing that it will take almost four years to get to a situation where invoices are paid on normal terms.
“The BMF’s position on Late Payment and other issues is detailed in our soon to be published BMF Policy Manifesto 2014/15. Our main concern is that there is no compulsion on contractors to sign up to this charter, or the government’s existing Prompt Payment Code and no teeth behind either to ensure that those who do sign up uphold their intentions. Without the threat of penalties, I fear that smaller companies, including merchants, will continue to suffer through late payment of invoices or by being forced to accept a longer settlement period than normal.”