Scottish construction still blighted by payment abuse

While across the UK as a whole there are signs of improvement in the treatment of subcontractors and suppliers, Scotland still has a way to go, it seems.

In a survey of 60 main contractors and 30 subcontractors in Scotland by the Construction Industry Collective Voice (CICV), 69% said the time and cost of chasing outstanding money was their most significant problem when it came to payment.

Half of the companies said they required external assistance to deal with payment disputes, with 54% saying they had referred a dispute to adjudication.

Only 17% had ever seen a project bank account and 38% had never even heard of them.

Other finding included:

• 68% said their payment terms were altered negatively, with 60% claiming adjustments to payments were made with little or no explanation.
• 52% reporting that they still have problems getting retentions paid
• 44% revealing that they had been hit with unexpected charges
• 40% disclosing that they “always or often” had payments reduced
• 30% saying payment delays have a “major impact” on their company.

Len Bunton, chair of the CICV’s pipeline & commercial sub-group, said: “From these findings, it is clear – and also rather depressing – that cashflow and payment issues are still major problems in the construction industry in Scotland.

“It is especially frustrating to see so many financial disputed still going to costly adjudication and so little take-up of solutions like project bank accounts and the conflict avoidance process – despite evidence that they do work and help to improve all-important cashflow.”

The results contrast with UK-wide data submitted by construction companies under the government’s Duty to Report on Payment Practices and Performance. Since 2018 tier one contractors have reduced their average payment time from 45 to 30 days and now pay 94% of invoices within 60 days, up from 82% five years ago.

The CICV survey also invited respondents to provide anecdotal evidence of cashflow and payment issues, along with suggestions of how to improve the current situation.

One said: “I’d like to see less subcontracting and more directly employed trades so there’s a joined-up process and effectively one large purse with collective ownership. The minute we subcontract we divide, and priorities, focus and responsibility aren’t truly shared.”

Another said: “We have problems with the public sector with too many authorisations that prolong and delay payment. A simplified process would help.”

A third added: “Many years ago, main contractors had to show proof of payment to subcontractors before they received their next payment. Implementing such a practice for all subcontractors would hugely improve the payment process.”

A fourth said: “Employers need to be held accountable and measured against the agreed payment terms within the building contract.”

The Construction Industry Collective Voice is an alliance of 28 associations and federations that originally came together as the  Construction Industry Coronavirus (CICV) Forum in March 2020.

The CICV is now preparing a best practice guide to help contractors navigate payment issues.

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