A survey by the Construction Industry Collective Voice (CICV) has found that the Scottish construction industry is still blighted by serious payment and cashflow issues
The Scottish construction industry is still struggling with late payments, outstanding retentions and unexpected charges, according to 69% of respondents.
The survey on cashflow and payments was undertaken to help an accurate picture of the current financial landscape in the Scottish construction industry.
Answered by those businesses which operate both as main and sub-contractors in the public and private sectors, some 68% of respondents said their payment terms were altered negatively, with 60% claiming adjustments to payments were made with little or no explanation.
And 69% of those surveyed said the time and cost of chasing outstanding moneys was their most significant problem when it came to payment.
Key findings on the Scottish construction industry included:
- 52% reporting that they still have problems getting retentions paid
- 44% revealing that they had been hit with unexpected charges
- 40% disclosing that they “always or often” had payments reduced
- 30% saying payment delays have a “major impact” on their company.
Some 50% of respondents said they required external assistance to deal with payment disputes, with 54% saying they had referred a dispute to adjudication.
And 62% of those surveyed also said they were aware of project bank accounts, but only 17% had actually used them.
Len Bunton, chair of the CICV’s Pipeline & Commercial sub-group, said: “From these findings, it is clear – and also rather depressing – that cashflow and payment issues are still major problems in the construction industry in Scotland.
“It is especially frustrating to see so many financial disputed still going to costly adjudication and so little take-up of solutions like project bank accounts and the Conflict Avoidance Process – despite evidence that they do work and help to improve all-important cashflow.”
Surveyees suggested standardisation and simplification as solutions
The survey also invited respondents to provide anecdotal evidence of cashflow and payment issues, along with suggestions of how to improve the current situation.
One said: “I’d like to see less sub-contracting and more directly employed trades so there’s a joined-up process and effectively one large purse with collective ownership. The minute we sub-contract we divide, and priorities, focus and responsibility aren’t truly shared.”
Another told the poll: “We have problems with the public sector with too many authorisations that prolong and delay payment. A simplified process would help.”
A third added: “Many years ago, main contractors had to show proof of payment to sub-contractors before they received their next payment. Implementing such a practice for all sub-contractors would hugely improve the payment process.”
While a fourth respondent said simply: “Employers need to be held accountable and measured against the agreed payment terms within the building contract.”
A best practice guide is being developed by CICV to comabt issues found in the Scottish construction industry
The CICV is now devising a series of measures to help combat issues highlighted in the survey, including the imminent publication of a best practice guide. The collective is also planning an online webinar, offering contractors practical advice to help them avoid payment pitfalls observed in the Scottish construction industry.
David MacDonald, a member of the CICV’s Pipeline & Commercial sub-group, added: “The many troubling issues highlighted by this survey simply reinforce the need for the industry to resolve matters before they escalate into disputes.
“The best practice guide, to be published by the CICV shortly, is designed to be used to eliminate poor commercial management and assist contractors to be much more alert to potential problems and risks.
“The planned webinar will also help contractors navigate the perilous waters of payment, which are clearly still littered with many difficulties.”
