Construction Sector: Cash Retentions

Lord McNicol of West Kilbride Excerpts

Monday 11th December 2023 Lords Chamber

[Lord Offord of Garvel (Con)]

I thank my noble friend for that contribution. The Reporting on Payment Practices and Performance Regulations 2017 require the larger UK companies to report on a half-yearly basis on payment practices, policy and performance. The onus is increasing on them around transparency. The sector welcomes increasing reporting regulations. Build UK, the leading construction trade body, has been benchmarking construction companies on their payments since 2018, and improvements have been considerable. In 2018, the average time for paying invoices was 45 days, and it is now 32 days; the figure for invoices paid within agreed terms is now 82%, versus 61%, and for invoices paid within 60 days it is now 95% versus 82%. That shows that the construction industry can work positively in this area.

[Lord McNicol of West Kilbride (Lab)]

My Lords, similar to cash retention, late payments are a perennial problem, especially for SMEs and microbusinesses. Over the last 10 years, the Conservative party in government has launched no fewer than seven reviews into late payments. What recommendations have come from those reviews, and what benefits have SMEs seen from those seven reviews?

[Lord Offord of Garvel (Con)]

I thank the noble Lord for that question. As I indicated, the direction of travel has improved considerably, with the construction sector working positively to reduce the amount of late payments. Working with the contractors’ umbrella body, Actuate UK, and the new Get it Right initiative, I think we will see some improvements. We are trying to get defects and collection and completion certificates using processes developed by the Get it Right initiative, which are going to be data-based, to try to get a metric system which is more objective and less subjective and which can measure performance and indicate at an early stage whether it has been to the right standard. That will go a long way towards allowing earlier payment on retentions.