Almost two-thirds (63%) of UK engineering services firms were not paid within 30 days by public sector bodies in Q2 this year, a late-payment performance that in many cases will be in violation of government regulations, according to a new survey.
The Electrical Contractors’ Association (ECA), the Building Engineering Services Association (BESA), and SELECT, Scotland’s Electrical Trade Association, said late payments by organisations such as local authorities and the National Health Service had worsened from the 55% figure in Q1.
Moreover, 39% of firms said that more than 3% of their turnover was being held in retentions by firms up the supply chain.
ECA CEO Steve Bratt said, “With public sector support – including prompt payment – our sector can deliver key infrastructure projects and provide skilled technical employment. This would support of government objectives for growth and delivering whole-life asset value to the UK economy.”
SELECT Managing Director Newell McGuiness said, “Late payment can have a devastating effect on engineering businesses, as well as to the wider economy. Cash flow is vital to ensure apprentice recruitment, employment and up-skilling training continues to grow. In our view, improving the velocity of cash is vital in improving our industry.”
The public sector bodies’ supplier payment performance may be in contravention of the Public Contracts Regulations 2015.
Separately, research by Funding Options said that payment delays and the shortage of bank funding in the construction sector are forcing SMEs to rely on directors for funding, with board members lending £38m to small sub-contracting businesses in 2015-16, up 28% in two years.
CEO Conrad Ford said, “Given that the nature of their work often involves quite significant upfront outlay on materials and labour, this is likely to have made a critical difference to the ability of many firms to manage cash flow and keep trading. For a sector that is often criticised for the perceived prevalence of cash-in hand payments, this data shows that, in fact, directors are prepared to make personal financial sacrifices for the good of their companies.”