A difficult week for construction

The liquidation of construction giant Carillion could lead to potentially catastrophic losses for thousands of SMEs, according to industry insiders. It’s had a history of payment abuse and one wonders why contractors wanted to work for someone who paid invoices after 120 day?

With the story continuing to unfold what is becoming clear is a business struggling for cash and using every excuse to avoid payment. According to its latest set of accounts, Carillion was holding over £800m in retentions payments owed to sub-contractors. It now seems likely that this money will be lost leaving many more firms at risk of financial collapse.

Government needs to take swift action to protect the construction supply chain and support the proposed amendment to the Construction Act by Peter Aldous, MP for Waveney, which seeks to amend the 1996 Construction Act to ensure retention money is held in a deposit protection scheme – avoiding just this kind of situation.

The Government then needs to consider the whole issue of payment. Carillion, while one of the worst offenders, is not an isolated instance. Sadly there are examples of many businesses who abuse payment and often use it to bully their supply chain.

The culture of payment abuse must stop if the construction industry is to move forward. Clients who treat their supply chain with respect attract suppliers and customers who want to benefit from a more positive business environment. A more positive environment leads to improved efficiency and a better outcome.

If there is one benefit of the Carillion collapse, let it be a watershed moment for how business is conducted and the reputation management of companies active in the sector.