The government has recently announced plans to, once again, take action against late payers within the construction industry.
The question of late payment is one that has long dogged the construction industry and is a constant cash flow headache for contractors and sub-contractors alike. This can often lead to cash flow difficulties, beyond their control, for even the most reputable builders.
What is worse is that such late payments can often be passed down the chain of contractor, to sub-contractor, to sub-sub-contractor, with the delay being magnified at each stage. Often the practical result of this is that the greatest cash flow strain is put on the smallest contractors, who are least able to bare it.
It is understood that the government intends to implement a new Fair Payment Code, which will replace the previous Prompt Payment Code and this is to be launched later this year.
The new code will aim to reward quick payers and penalise late payment, with suggestions of potentially unlimited fines and criminal records.
In addition, the government have stated that they will be considering new laws to hold larger firms to account as well as launching a consultation on the matter. It is unclear if this consultation will consider banning retention, which has been suggested by some members of the Construction Leadership Council in the past.
If so, then to how much of the industry such a ban would apply, will become an important question. Given the importance of retention to residential clients for prompting performance from contractors, with regard fully completing the works and attending to snagging items, a ban could leave clients and their advisors in search of new ways to enforce contractor performance.
This government is not the first to try and tackle this issue and it remains to be seen if this new Fair Payment Code promotes any real change or proves just to be an exercise in semantics.
