NFB: Withholding subcontractor payments is unethical

Members of the National Federation of Builders (NFB) consistently report that public sector clients, including central government, do not pay on time.

As regional contractors and SMEs, a large proportion of projects these members fulfil are subcontracted via larger construction companies. Some main contractors impose 120-day payment terms, with £10.5 billion withheld in retention payments and around £22 billion in annual SME turnover is paid late.

If we are to recruit apprentices and deliver world class building and infrastructure projects, the industry needs to reduce retentions and late payment. The Government, and all construction clients, need to pay on time and take a long-term view on the health of those businesses its practices affect.

The Construction Act requires public bodies to pay undisputed invoices within 30 days and there is an adjudication process in place. However, many companies do not use it for fear of jeopardising future work.

Richard Beresford, chief executive of the NFB, said:

“Late payment and retention of funds remain a problem for UK construction companies, despite widespread recognition that these practices are unacceptable. The NFB and its members provide a clear voice and act on those words. One of our members, Colmore Tang Construction, is offering to pay subcontractors affected by the demise of Carillion earlier than their contract terms in order to provide some stability. This is the kind of collaborative leadership the industry needs and represents the best construction has to offer.”

In 2007, the National Federation of Builders (NFB) was one of the first organisations to take issue with how the Government’s approach to procurement and frameworks put SMEs and regional contractors at a distinct disadvantage.

We continue to work with central Government and local authorities to yield results for SMEs, regional contractors and local economies, without a reduction in quality.

Read Richard Beresford’s full article Time to take a fresh look at procurement.