News

Leading construction industry firms suspended over late payment

Seven big-name construction firms are among 17 companies removed or suspended from the government’s Prompt Payment Code (PPC) during the past quarter for failing to pay suppliers.

Over a third of the firms hit by the purge on payment performance came from construction and are major players. The Chartered Institute of Credit Management (CICM), which runs the scheme on behalf of the government, reported that the most serious action has been taken against John Sisk & Son. The international construction company was removed from the PPC, with six other firms have been suspended for unfairly treating suppliers.

Those suspended include key industry players Balfour Beatty, Costain, Engie Services, Interserve Construction, Kellogg Brown & Root and Laing O’Rourke. Additionally, leading housebuilder Persimmon Homes has also been suspended.

The government introduced the PPC back in 2008 in response to calls from businesses for action to be taken to change the payment culture. The code includes a commitment to pay 95% of all supplier invoices within 60 days. Those businesses suspended from the code will now have to produce an action plan outlining how they will achieve compliance within an agreed period. Once they achieve compliance, their status as a code signatory firm will be reinstated. However, if they do not then they will be removed.

Philip King, Chief executive of CICM said: “The board is disappointed with the actions of a minority who continue to treat their suppliers unfairly and has no satisfaction in having to name them publicly. As part of our work driving culture change to end late payments, we will continue to challenge signatories to the code if the obligatory Payment Practice Reporting data suggests that their practices are not compliant with the Code.”

News of the suspensions builds on a government announcement in November, where failure of companies to demonstrate prompt payment to their suppliers could result in them being prevented from winning government contracts.

From September 1st, 2019, any supplier who bids for a government contract above £5m per annum will be required to answer questions about their payment practices and performance. The expected standard is to pay 95% of invoices in 60 days across all their business. Any supplier who is unable to demonstrate that they have systems in place that are effective and ensure a fair and responsible approach to payment of their supply chain may be excluded from bidding.

In October the Business Secretary Greg Clark announced that further reforms to the Prompt Payment Code were being considered, including whether the Small Business Commissioner should have a greater role in its administration as part of his wider role in tackling late payment.