Until the specialists’ experience is that in practice they get paid within terms for work successfully completed, the CFA will continue to support and speak up for its members in the theatre of payment, says Richard Catt.

‘ARE payment practices improving?’ There are a number of subject areas the CFA works on that are constants. Regrettably poor payment practices is one of them and this update is stimulated by recent work we have undertaken providing input into the consultation on the Duty to Report Regulations. This ranged across invitations to engage from BEIS, CPA and Build UK.

A phrase that came into my vocabulary during lockdown is ‘the lens through which you see things’ and for me that applies perfectly to payment practices. As the CEO of a trade association, I make no apology that my lens is very much that of a specialist flooring contractor. A question we therefore consider periodically is ‘are payment practices improving?’

Build UK suggest there is improvement, with headlines such as their tier one contractors improving payment performance to an average of 30 days from 45 days in 2018, using the duty to report as a benchmark. That is a great statistic and one that surely(?) reflects some progress, and as with the consultation, keeps payment near the top of the agenda. Build UK are the only trade body that measure members in this way and should be commended for their continued work. However, Build UK’s statistics speak from the main contractor perspective, and it seems that the experience of CFA contractor members is not quite as positive.

The following is taken from our membership return and compares 2018 to 2022. The same five-year period.

2018

• 74% of our members turned over
• <£2 million and were paid in an average of 41 days.
• 22% of our members turned over between £2-10 million and were paid in an average of 48 days.
• 4% of our members turned over >£10 million and were paid in an average of 54 days.
• The average days to get paid across all business sizes was 48 days.

2022

• 70% of our members turned over
• <£2 million and were paid in an average of 39 days.
• 28% of our members turned over between £2-10 million and were paid in an average of 45 days.
• 2% of our members turned over >£10 million and were paid in an average of 49 days.

The average days to get paid across all business sizes was 44 days.

In other words, our members do not agree that they are being paid within 30 days and in fact their experience suggests things have only marginally changed for the better since 2018.

What is also important to recognise is that these statistics cover a range of business sizes and many of the smaller companies work directly for larger flooring contractors or end clients only.
Because they tend to provide a better experience in terms of payment. We see maximum average days to get paid recorded as high as 90 days for those who work for the worst payers and so it seems that the better payers are in fact improving the average for the worst.

Underlining this point is our metric for the total value of invoiced work that is outstanding which was reported by members as over £22 million pounds across 297 contractor members in 2022. A further peek behind the curtain of main contractors’ attitude to payment is our statistic for retention withheld. In 2022 this was a total of £15.25 million again across 297 members. I was speaking to another trade association CEO recently who discussed this problem with a main contractor who pointed out that much more retention is withheld against main contractors than they withhold from specialists. The telling question from my counterpart was how much is eventually paid to the main contractor as opposed to what they eventually take as discounts from specialists.

Thinking of the big picture there is much anecdotal evidence that payment is still crippling many businesses, and a recent Construction News headline (4 April 2023) pointed out that administrations in construction had reached a three-year high. This was the highest number of administrations since they began publishing data in January 2020.

As part of the Government’s Payment and Cash Flow Review that we have contributed to, they offered six proposals for amendments, and I think these are very interesting if in considering their relevance you also ask why they are needed? They included a main proposal to extend the duty to report beyond 6 April 2024. The following specific proposals were also tabled for amending the Regulations to further increase transparency of payment performance:

Adding a new metric for the total value of invoices not paid within agreed terms

• Including information on retention payments for construction contracts
• Considering disputed invoices as a ‘separate entity’
• Clarifying the payment dates that should be reported when supply chain finance is used

Introducing a requirement to include the payment report within a directors’ annual report.

During meetings I attended, and again reading press coverage in Construction News, it is clear that the larger companies that are obliged to report are fully complying with the current regulations, but that some ‘loopholes’ create a picture that one might argue is slightly false. The above proposals (and my observation in this piece) allude to some of the issues that skew the figures in the duty to report tables. In practical terms one has to recognise that the invoices that main contactors report can include stationary, energy bills, toilet rolls, diesel etc and some smaller construction works, and therefore may not accurately reflect a few larger invoices for work carried out by a specialists within construction that have not been paid within terms. This will still allow a main contractor to declare an average of 30-day payment for the majority of invoices settled.

As our lead in this area, Build UK have outlined they will be submitting a comprehensive response to the consultation based on ‘the experience of their payment performance table’ and have outlined that they feel …

‘The key principle for any amendments to the Regulations should be that they strike an appropriate balance between providing meaningful data for the supply chain on the one hand and not resulting in a significant burden on reporting businesses on the other.’

That of course mainly speaks for their main contractor members.

We have argued that the loopholes need closing and we cannot be too sympathetic of the administrative burden until … well until the experience of the specialist is that in practice they get paid within terms for work successfully completed. Until then the CFA will continue to support and speak up for our members in the theatre of payment. That’s the lens through which we see things.

The CFA is a leading trade association representing the flooring industry. If you would like an application pack outlining the benefits of membership, please contact the CFA offices.
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