Friday, April 13, 2018

Destination Downing Street

David Frise, BESA CEO

It is not every day that you can say you are planning to drop in on the Prime Minister, but these are not ordinary days.

As BESA chief executive, I am privileged to be part of a very special coalition backed by almost 350,000 businesses. We will be delivering a petition on fair payment and retentions to 10 Downing Street on April 23rd – making your voice heard in the corridors of power.

I, along with the chairman of the Federation of Small Businesses (FSB), the director general of the Institute of Directors, and my counterparts at the Federation of Master Builders and the ECA, will be accompanying Peter Aldous MP, who is rapidly becoming our parliamentary champion on this crucial issue.

We are representing an incredible coalition of more than 75 trade bodies, whose members all suffer from the scourge of late payment and lost retentions. They represent businesses from right across the construction supply chain including house builders, roofers, scaffolders, electricians, plumbers, fit-out and demolition firms as well as, of course, building engineering specialists.

This unprecedented show of support also represents a major triumph for the Specialist Engineering Contractors’ (SEC) Group, led by Rudi Klein and Trevor Hursthouse. They ploughed a lonely furrow on late payment for more than two decades and made some major breakthroughs; and this new level of progress owes much to their determination and refusal to back down on this issue.

Our visit to Whitehall comes just four days before the second reading of the ‘Aldous Bill’ in the House of Commons, which proposes that cash retentions owed to suppliers are protected in trust accounts so cannot be misused or lost when a major contractor goes bust.

Of course, the Prime Minister has a lot of big issues on her plate these days, but we know that the Cabinet sees this as a priority. The collapse of Carillion in January has bounced late payment up the political agenda; particularly as the company took with it more than £800m in retentions. Had that money been held in trust, it could have been recovered. Instead it is lost and thousands of companies are paying the penalty.

To quote FSB national chairman Mike Cherry: “It defies natural justice that a contractor which completes a job and does it well can be left exposed in this way. Withheld retentions were originally intended as security in case a firm doesn’t return to rectify non-complying work. In modern practice, they are withheld to boost the cash flow of the party withholding them.

“The proposal to hold retentions in trust would be a sensible way to prevent this from happening, and protect small hard-working businesses in the supply chain against a Carillion-style financial demise.”

The full impact of Carillion’s habit of withholding cash from its supply chain is starting to hit home. Part of the Vaughan Engineering group has recently been forced into administration and, I fear, that others will follow.

We had been warning governments for many years that late payment had the potential to undermine the whole construction process and leave cherished public sector projects in jeopardy – and so it has proved…and now they are listening.

We will remind the government that our industry is more than capable of delivering a first-class built environment that benefits our society. Without us there can be no office buildings; schools; hospitals etc, but cash retentions and late payment hold us back.

BESA members are part of a modern strategic industry that can be a building block for future growth and the well-being of UK citizens.  Yet it is an industry made up of SMEs and individuals who are starved of working capital by outdated payment processes that are widely abused. 

Reforming legislation quickly will start to show that lessons have been learned from Carillion and that our politicians now recognise the damaging impact this has right across the economy.

We have reason to be hopeful that change is finally coming. As well as the unprecedented level of solidarity over this cause, we also have supporters in high places. The Chancellor Philip Hammond referred to the “scourge of late payment” in his recent Spring Statement and Business Secretary Greg Clark has given evidence to the committee of MPs investigating the collapse of Carillion.

Another high profile figure, who understands this issue well and will be part of our Downing Street delegation, is the director general of the Institute of Directors Stephen Martin. “Late payment is an issue for companies in many sectors, but retentions in construction is one particular area where bad practice is all too common,” he says.

“Having worked in construction for most of my career, I know how much it can affect smaller firms if payment is unfairly held back, so I am very happy to support this Bill.”

April 23rd will be the day when the country sees just how united the business and engineering communities are over this issue and April 27th holds the promise of real and lasting reform. It is going to be a big week.

We know you are behind this in spirit, because everyone is affected, but it would also be great to have you with us in body on the 23rd. So, anyone who would like to join us, please meet by Churchill’s statue in Parliament Square at 12.30pm on the day. You will be most welcome…but if you can’t be there in person, you could still petition your local MP using our template letter here.

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