Carillion M&E firm collapse spurs call for late payment law

Aaron Morby 6 years ago
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Specialist contractors are calling for the Government to introduce late payment legislation with teeth after the high-profile collapse of Carillion M&E specialist Vaughan Engineering.

Frise calls on Goverment to act after years of failed voluntary initiatives
Frise calls on Goverment to act after years of failed voluntary initiatives

Chief executive of the Building Engineering Services Association David Frise said consultation and voluntary measures had failed the industry allowing late payment to undermine the supply chain and send specialist contractors to the wall.

Prompt payment legislation backed up by tough enforcement was needed now – not further consultations or voluntary measures, according to the new chief executive of the Building Engineering Services Association

Frise urged the government to pick up the pace of reform in light of the insolvency of Vaughan Engineering, which was linked directly to January’s collapse of the construction firm Carillion.

“The government already has many of the tools it needs to tackle this problem,” said Frise.

“The Aldous Bill, which seeks to bring about reform of the retentions system, is due to have its next reading in Parliament on April 27. Project bank accounts are being widely – but not universally – adopted; and the emergence of digital payment makes transparency in supply chain finance far easier to achieve.

“I can’t see why this needs any further discussion.”

Fris added: “Thousands of SMEs have been left in a perilous financial state as a result of Carillion and the government must respond.

“Today there are 160 people facing redundancy directly as a result of Carillion failing to pay Vaughan Engineering for completed work.

“The government must not stand idly by and watch more companies go under and more people lose their jobs.”

MPs investigating the Carillion insolvency have expressed grave concerns about the Prompt Payment Code administered by the Department for Business, Energy and Industrial Strategy .

Carillion was a signatory to the code and received public sector contracts as a result, but forced its own supply chain contractors to accept 126-day payment terms.

Frise revealed that BESA intervened directly on behalf of Vaughan Engineering, which appealed to it for help, but received no response from local or central government.

He also added that the association was continuing to support several other member firms affected by the Carillion fall-out.

BESA, along with electrical contractors body, ECA, met business secretary Greg Clarke in the aftermath of the Carillion insolvency, to stress the importance of supporting payment security measures such as placing retention money in ring-fenced deposit protection schemes; project bank accounts; and public contracts payment models.

“We have had multiple voluntary late payment initiatives over the last two decades – none of which proved of to be of any use whatsoever in the face of notorious late payers like Carillion,” said Frise.

“Mr Clark is right when he says this is an urgent problem that is fundamental to our economy. So let’s have urgent and tough action – starting with getting the Aldous Bill through Parliament on April 27.”

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