In the wake of the lack of effective measures to deal with payment abuse following the Carillion collapse two years ago, Labour peer Lord Mendelsohn will introduce today (21 January 2020) a new payment bill.

Lord Mendelsohn has taken up representations from leading construction body, the Specialist Engineering Contractors’ (SEC) Group and others, to improve payment security for SMEs.

The bill incorporates the following measures:

• A statutory limit of 30 days in which all firms will be required to discharge due payments;
• Given the crippling costs of adjudication, small firms in construction will be able to refer payment disputes to the small business commissioner;
• The remit of the small business commissioner will be expanded to confirm that it includes construction and the commissioner will have powers to impose penalties on large companies which are serial late payers, provide false payment performance data and fail to provide requested information as part of investigations.
• Accrued interest on late payments will be automatically included in due payments (without the need to separately claim it);
• Certain unfair payment practices will be outlawed such as sub-contractors having to pay fees to get on main contractors’ preferred lists of suppliers and payment of fees to get paid earlier under supply chain finance schemes;
• The Bill amends the public contracts regulations 2015 to mandate the use of project bank accounts for public sector works over £0.5m.

Rudi Klein, SEC Group’s CEO, welcomed the move by Lord Mendelsohn. “I wish to place on record my thanks to Lord Mendelsohn and also the thanks of SMEs in the UK’s construction industry which have had to bear the impact of payment abuse and losses from major insolvencies in the industry,” he said.

“The construction industry is in the midst of an insolvency crisis with 2019 insolvencies likely to overtake by a wide margin the figure of 3,013 insolvencies in 2018.  The government’s manifesto for the recent election made clear that it would “clamp down on late payment” but, since Carillion’s collapse, all we have had are numerous consultation documents,” said Klein.