SCOTTISH CONSTRUCTION INDUSTRY STILL IMPACTED BY CASHFLOW ISSUES

Construction businesses in Scotland are still suffering the scourge of late payments, outstanding retentions and unexpected charges, a new survey by the Construction Industry Collective Voice (CICV) has revealed.

Some 68% of respondents to the body’s in-depth poll 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. The unique collective’s survey on cash flow 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, its key findings included 52% reporting that they still have problems getting retentions paid and 44% revealing that they had been hit with unexpected charges.

They also found that 40% disclosing that they “always or often” had payments reduced and 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. 62% of those surveyed also said they were aware of project bank accounts, but only 17% had actually used them.

Len Bunton (pictured above), Chair of the CICV’s Pipeline & Commercial sub-group, said: “From these findings, it is clear – and also rather depressing – that cash flow 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 cash flow.”

The survey also invited respondents to provide anecdotal evidence of cash flow 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.” 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. David MacDonald, who is also 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.” The survey is the latest in a string of practical and constructive initiatives launched by the CICV since its creation as the Construction Industry Coronavirus (CICV) in March 2020.

Made up of 28 trade associations, professional services bodies and companies, it has maintained a steady supply of information and practical advice to the sector as well as carrying out surveys, producing animations and posters, hosting webinars and maintaining close dialogue with Scottish Government ministers.