Editors comment
EXTORTION BECOMES THE NORM
THE recession has led to cut-throat competition in some industries, especially construction. Last month I outlined problems, including retentions. Much has been said about how some builders and clients abuse this obsolete system. Retentions, which originated over 160 years ago in Victorian times, has become a way for main contractors to boost cashflow with ‘interest-free loans’ and no compulsion
to repay.
The NSCC reveals the deceit of this totally unjustified penalty in the fair payment campaign. But despite their best efforts, there is currently no sign that retentions will disappear any time soon. On the contrary, there are reports of rising fees and more money owed and unpaid.
Now with growing financial pressures on construction firms, there is new swindle threatening the survival of many flooring contractors. Already being squeezed to the limit, they now have to contend with an unscrupulous scam that is becoming widespread.
If you as a sub-contractor want to work for certain main contractors you will be liable for ‘incentive payments’, also known as rebates. That’s exactly what it implies: You pay them for the privilege of working for them! The only word to describe this is extortion!
But that’s not all. You bid for a project and agree to a suicidal margin just to get the work, but then you are set to start the job and the main contractor unilaterally announces a discount on payments
to suppliers.
Professor Rudi Klein, a vocal campaigner for the rights of specialist contractors, condemns this as ‘demanding money with menaces’. He has written to Government ministers urging a stop to this outrageous practice, but has so far met with little sympathy.
The new Construction Act was supposed to give more certainty about payment, but some main contractors are manipulating the legislation to introduce terms and conditions that shift the balance of risk onto the subbie.
Payment in 30 days, a key point of the NSCC campaign, is now relatively rare, while a staggering 120 days is becoming common in some sectors, including fit-out. It’s no wonder that professional and reputable flooring contractors are being forced out of business.
As Britain faces steeply rising unemployment forecast this year, the appaling prospect is for skilled floorlayers and other construction trades landing on the dole.
The Government pays lip-service to apprenticeships and the importance of construction to the UK economy, but says nothing about all the jobs of experienced trades people going down the drain. How about some coherent policies to generate growth to foster a recovery? Without urgent action the recession could linger on
for years.
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