Carillion M&E Specialist Falls, Spurring Calls For Late Payment Law

26th March 2018

Specialist contractors are calling for the Government to introduce late payment legislation after the high-profile collapse of Carillion M&E specialist Vaughan Engineering.

The 60-year-old engineering company fell into administration over the weekend, putting 160 jobs at risk. The business is owed £650,000 by Carillion, making it the failed construction company’s first supply-chain casualty. Its collapse has spurred further talk on how to tackle the late payment culture of the UK. Despite mild and voluntary measures offered by the Government, such as the Prompt Payment Code, these have not encouraged businesses to pay on time, and experts are demanding a tougher approach. Both the small business commissioner and small business minister have made claims to stop late payment, but this must recent company failure demands prompt action.

Here at the Credit Protection Association, we have witnessed, and eased, the negative effects of consistent late payments. Our small business members have suffered the most, with their vulnerable position in the economy making them easy targets for supply chain bullying. It has become part of our business culture to pay businesses late, so in order to stop this happening, we will need to see a complete cultural shift.

Chief executive of the Building Engineering Services Association David Frise is critical of the consultation and voluntary measures that the commissioner and minister have encouraged, he perceives their ineffectuality as having failed the industry.

“Prompt payment legislation backed up by tough enforcement is needed now – not further consultations or voluntary measures”.

Frise urged the government to pick up the pace of reform in light of the insolvency of Vaughan Engineering, which was linked directly to January’s collapse of the construction firm Carillion.

MPs investigating the Carillion insolvency have expressed grave concerns about the Prompt Payment Code administered by the Department for Business, Energy and Industrial Strategy.

Carillion was a signatory to the code and received public sector contracts as a result, but forced its own supply chain contractors to accept 126-day payment terms.

“The Aldous Bill, which seeks to bring about reform of the retentions system, is due to have its next reading in Parliament on April 27. Project bank accounts are being widely – but not universally – adopted, and the emergence of digital payment makes transparency in supply chain finance far easier to achieve.

“I can’t see why this needs any further discussion”, Frise urged.

Despite efforts by government and other official bodies, late payment remains a significant problem for businesses in the UK. While not ignored by government and various proposals have been launched to fight it, none of these has been brave enough to confront late payers. Late payers are typically large businesses who perceive themselves above payment terms and inflict damage on smaller business as a result. So-called supply chain bullying needs to be combated to protect the lifebloods of the economy as well as stop more construction and engineering companies going under.

While experts and officials fight the courts, here at CPA we will continue to fight it at street level. Our debt recovery services free up cash flow previously damaged by late payers. Our late payment products also keep our members’ finances late-payer-proof, where they can utilise our credit checking facilities to ensure all their customers and suppliers pay on time.