Late payment bill boosts calls for project bank accounts

Grant Prior 6 months ago
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Late payments campaigner and MP Debbie Abrahams has put forward a bill calling for payments on government and public authority contracts to be made through project bank account.

The Public Sector Supply Chains (Project Bank Accounts) Bill will get its second reading in March.

Abrahams said: “When payments take a long time working their way along a supply chain from the contracting authority there is a risk that the cash could be cut-off at any time because of payer insolvency.

“We witnessed the catastrophic effect this has with the collapse of Carillion, a year ago to the day, with £2bn of unpaid invoices to their smaller suppliers.

“The precarious position of other major Government contractors like Interserve means urgent action is required.

“That’s why my ten minute rule bill will require government and public authority work be paid to suppliers using project bank accounts.”

During her speech Abrahams  raised the case of Oldham based contractor Johnson Bros Ltd who lost £176,000 in unpaid invoices from Carillion.

Owner Neil Skinner was in Parliament to watch Abrahams’ speech.

He said: “A few years ago Carillion were reasonably okay at paying our invoices, but even this was based on the fact that we could threaten to stop working in the middle of a job if we didn’t get paid for the work we had done up to that point.

“They paid us under these circumstances but only because they knew any delay would look bad for their performance index.

“Even so, payments still often went over sixty days, with a lot of chasing, and once the job for a particular customer was finished our sanction, to stop working, was gone and their payments just stopped.

“Carillion finally resorted to using all the familiar late payment tactics from finding fault with an invoice, referral to their accounts office in India, statement queries, disputed invoices paid, and so on.

“Then, lastly, they imposed a 15% non-negotiable discount on our work or they would send all unpaid invoices back to their QS department.

“We reluctantly signed this contract and they went ‘bump’ the Monday after signing and five days before the first part payment was due.

“As a result of Carillion’s late payment tactics small enterprises like mine have been suffering greatly, if not terminally.

“Large companies know late payment can destroy us small businesses but they rely on this tactic to ‘cook the books’ and be seen to be profitable themselves.

“Carillion went under owing us well over 15% of our average turnover and, following a difficult year last year, this money is much needed to help us survive.”

This Bill is fully supported by the Specialist Engineering Contractors’ Group representing the largest sector by value in the UK construction industry, and a leading late payments campaigner and advocate of project bank accounts. 

Rudi Klein, chief executive of SEC Group said: “Given the precarious financial state of many of the UK’s major contractors Debbie Abrahams’ bill is now extremely timely.  

“In fact it would now be very neglectful of Parliament or the Government to continue to ignore the concerns of SMEs in construction supply chains which have had to put up with payment abuse over many years.  

“Project bank accounts are now acknowledged to be the most effective method of ensuring secure and regular cash flow.”

 

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