What directors need to know
Prompt payment legislation comes into force in the UK on 1 September 2019 and means that large companies would be barred from bidding for government contracts if they don’t achieve a 95% payment rate of their invoices within 60 days.
Oliver Dowden MP, Minister for the Cabinet Office, spoke about the incoming change at the annual construction conference for the Royal Institution of Chartered Surveyors (RICS) and confirmed that 10,000 companies had already been contacted to remind them of the change.
He said: “For many small businesses, the difference between getting paid in 60 days and 90 days can be vital.
“That’s why I’ve warned big businesses they must do their bit and I’ve been clear that they could lose out on valuable government contracts if they don’t.
Alan Muse, global standards director at RICS, responded positively to the change. He said: “We’ve previously recommended linking payment records to procurement decisions, and we’re pleased that the new rules coming into force in September endorse this.
“RICS supports the changes wholeheartedly, and believe that this will lead to industry efficiencies for the benefit of all construction stakeholders, as well as supporting the small business across the UK.”
The changes couldn’t come at a better time for an embattled industry.
Tough times for the industry
Over 3,100 construction companies became insolvent between June 2018 to June 2019, the highest total in any sector in the UK economy and it seems that not a week goes by when another established company enters administration.
R Durtnell and sons was formed in 1591 and was Britain’s oldest building company before they ceased trading last month.
While it’s good news that the problem of delinquent payments is being addressed, it’s still another external issue that could have serious, potentially terminal consequences for your business – whether you’re in construction or any other industry.
The construction industry has an established process for recovery on disputed debts and for halting work when payments are not made.
Unfortunately the construction processes are not a quick solution and we appreciate you may not be willing to halt works for concern of not obtaining future contracts, but this late payment regime will hopefully go some way to shifting the onus to main contractors.
However, if this is too little too late and you need to consider your options, our expert advisors can run through your options to help obtain alternative finance and help keep your business in the black until the invoices are finally paid in full.
Alternatively your creditors cannot wait to be paid we can discuss options such as liquidation, administration or a CVA.