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Chancellor’s late payment elimination pledge cautiously welcomed by SEC Group

Phillip Hammond’s first Spring Statement includes aim to tackle the issue of late payments that has been an ongoing concern in the construction industry

The Specialist Engineering Contractors’ (SEC) Group has said commitments by chancellor Phillip Hammond to issue a call for evidence over tackling the issue of late payments will be cautiously welcomed in the construction industry.

Mr Hammond announced during his first Spring Statement that feedback would be sought over how best the UK could “eliminate the continuing scourge of late payments – a key ask from small business.”

The issue of late payments in the construction and building services sector has become a pressing priority of late for the industry due to payments still owed to contractors by construction giant Carillion, which entered into liquidation in January.

SEC Group said it will be inviting the chancellor to “act swiftly” in implementing measures to improve long-term payment security for small companies, which it said make up a significant part of the UK construction supply chain. 

SEC Group chief executive Rudi Klein argued that the construction industry was the worst sector for payment abuse despite 25 different initiatives over the last ten years to tackle the issue of payment performance. These initiatives include the publication of several reports and the introduction of codes and charters.

He said, “All these initiatives have not brought about the hoped-for improvements in cashflow security. However, the wording of the chancellor’s statement appears to show a determination to deal with the problem once and for all.”

The SEC Group played up its recent work and campaigns to improve construction payment security, such as pushing for the use of project bank accounts and the ring fencing of cash retentions, as an example of the changes it hoped to see introduced and supported by parliament.

A statement from the organisation said, “SEC Group intends to urge the chancellor to support legislation that will mandate the use of project bank accounts and ensure that retention monies are protected in the event of insolvencies up the supply chain.”

Earlier this week, industry body BESA announced that over 60 organisations and representative bodies working across the construction supply chain had now pledged support to the Construction (Retention Deposit Schemes) Bill introduced to parliament in January by MP Peter Aldous.

The bill would make it mandatory for any cash retentions to be held in third party deposit schemes if passed into law. A second reading of the bill in parliament will take place on April 27.

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