Major building contractors have improved their average payment times from 45 to 30 days after receipt of invoice, according to Build UK data.
They are also paying 95 per cent of invoices within 60 days, which is a key target for government contracts. And 83 per cent are paying invoices within agreed terms compared with 63 per cent in 2018.
Build UK deputy chief executive Jo Fautley said: “Since Build UK first began benchmarking payment performance five years ago, the construction sector has shown significant improvement. There is still more to do, but the value of transparency is clear to see, and our table has driven real change in behaviour led by Build UK members.”
Build UK said that transparency combined with senior business leaders’ peer pressure for their organisations to move up the table had delivered results.
“The majority have put significant effort into transforming their internal systems to improve the speed of payments.
“They have also provided guidance to suppliers, predominantly SMEs, on how to submit invoices correctly to ensure prompt payment,” she added.
Small business commissioner Liz Barclay said the payment tables were a good example of a trade body positively influencing payment practices within its sector.
“This kind of thought leadership drives payment improvements that are so crucial to the survival of small businesses in construction and their ability to grow and thrive,” she said.
Payment values should be included in reporting requirements
Currently, major UK companies are required by law to report their payment performance twice a year detailing the number of invoices they paid within the recommended 30 days and the amount they paid within 60 days. The Construction Leadership Council has asked the government to amend regulations to include the value of payments to support more ‘sustainable’ supply chain relationships.
The National Federation of Builders, NFB, agreed that reporting the value of the contract would be helpful.
NFB housing and planning head Rico Wojtulewicz said Build UK’s tables could be improved by knowing the percentage of contracts on agreed terms versus standard terms with a breakdown of construction and non-construction related payments.
“Paying a big company providing consumables for an office is very different to promptly paying a small builder whose business relies on cashflow to stay afloat,” he said.
Brokers Hank Zarihs Associates said commercial development lenders were keen to see greater transparency of larger firms’ payment performance so that SME builders could make informed decisions about who to do business with.
The Federation of Master Builders, FMB, said it would like the voluntary prompt payment code to have ‘more teeth’ to avoid job losses.
FMB chief executive Brian Berry said: “Late payments are a real issue for small, local builders who are cash flow reliant. Unfortunately, the industry is facing a tough time with increasing material prices and margins being squeezed. SME builders are often at the bottom of the supply chain and can find themselves being paid late due to delays further up the chain, which is why it’s important that everyone is paid on time.”