Tier 2 subcontractors are the net providers of trade credit within the construction industry, offering more trade credit to tier 1 contractors and clients than they receive from their own suppliers, according to new research by the Federation of Master Builders (FMB) and the National Specialist Contractors Council (NSCC).
FMB chief executive Brian Berry said: "Our research shows that fair payment is still a major issue in the construction industry. Our report – Credit where credit isn’t due – features responses from more than 700 firms with a collective turnover of £2.3 billion. It reveals that more than 90% of FMB and NSCC members agree contractual payment terms with their clients of 45 days or fewer but only 57% of members actually receive payment within those terms. This clearly shows that, although contractual payment terms are improving, late payment is still rife within the supply chain and much more needs to be done to ensure payments are made within terms."
Mr Berry added: "When it comes to their own supply chains, FMB and NSCC members pay within terms much more regularly, with 89% agreeing contractual payment terms of 45 days or less and 84% actually paying within those terms. The abuse of retentions remains a significant problem. At present, an estimated total of almost £440 million is withheld in retentions from all FMB and NSCC members, 45% of which are overdue and 12.5% of which are written off as bad debts."
He concluded: "The government’s Fair Payment Charter has so far had a limited impact and we need to work together to ensure wider awareness and sign-up, with the aim of ending this culture of late payment once and for all. It is holding back our industry in all sorts of ways, not least by damaging the image of the construction sector and deterring some people from wanting to work in our industry."
The report can be downloaded at http://resources.fmb.org.uk/docs/CreditWhereCreditIsntDue.pdf