Playing ‘cat and mouse’ over payment

CAB Chief Executive, Justin Ratcliffe, provides readers of Windows Active with updates on CAB’s latest lobbying on Late Payment

We may be officially out of recession but it would be fair to say that while members can see a bright future, there is still a degree of caution in the interim. There is no doubt that the CAB Quarterly State of Market survey for Q4, 2013 showing increased confidence levels for investment in plant/machinery and e-business is showing signs of being accurate there is a sense. The mood is perhaps best summed up by members who say something along the lines of ‘we can see the forward order book and know things are getting better – it just does not feel like it!’ But what are the factors that continue to affect our sector most.

While we have seen various indexes highlighting consumer confidence at the highest level for 3 years we are still facing some harsh realities. Take for instance Government ‘Framework’ contracts – recent reports have suggested that SME’s are having to wait 9 months to know if they have won a contract which is only really feasible for larger companies. SME’s simply cannot operate month with a 9 month delay on cash flow and keeping resources on hold in case a contract comes through. This is particularly relevant to the aluminium in building sector where we are still seeing some reluctance to take on additional overheads after 5 tough years. The question that a number of businesses in the sector are asking themselves is – do we spend up to 9 months or more tendering for government contracts or do we spend the time developing or introducing new products and lines.

So, apart from the CAB Quarterly State of Market Surveys do we have any other evidence of the issues facing our sector. An interesting poll on the Construction Professionals Forum on LinkedIn entitled ‘Top 3 Challenges for Construction’ in April/May 2014 makes interesting reading. In priority order the results are: Payment terms, labour and skills shortage and workforce competency/sustainability.

The first is an issue that CAB continues to lobby on very strongly especially in light of the recently launched Construction Supply Chain Payment Charter which is targeting standard payment terms of 30 days and no retentions by 2025 (60 days payment terms from end of month by 1 January 2015). In advance of the launch of the Charter, CAB had lobbied strongly including meeting with the Chief Construction Adviser, Peter Hansford at the House of Lords together with a group of CAB members.

Last month we had the opportunity to address the issue to the Deputy Prime Minister and Lord President of the Council at the Guildhall in London in front of an invited audience of around 600 and then privately afterwards. In response to a CAB question about the serious effect that late payment was having on the aluminium in building sector the Rt Hon Nick Clegg MP said that he had lost count of the number of SME’s up and down the Country who told him that they were being strung out by large organisations who play ‘cat and mouse’ over payment. He acknowledged that he wanted to see further action. CAB for its part is striving to get the issue into all party manifestos for the 2015 Election.

On 13 May, CAB took the opportunity to raise the late payment issue at an Aluminium Federation All Party Parliamentary Lunch, which included members from both Houses. We emphasised again the huge task facing members and highlighted that last year a cross-party inquiry in 2013 revealed that an incredible £36 billion was owed to 124,000 SME’s, many in construction. We urged support for the Construction Supply Chain Payment Charter as late payment issues were still forcing many construction companies out of business – including very recently a large CAB Fabricator. For more information on CAB and its activities contact Julie Harley on 01453 828851 or email julie.harley@c-a-b.org.uk.