Poor payment practices in the construction industry

Poor payment practices within many UK construction supply chains cause economic and social damage and undermine the reputation of the industry. It’s time prompt payment became the norm, not the exception.

Prompt payment in construction

When it comes to prompt payment in construction, conventional logic breaks down. In everyday life, we typically pay immediately and in full for goods and services, but in construction, there is – too often – a tendency to delay payment or pay less than what is due.

Poor payment practices

Poor payment practices are a factor in construction’s poor reputation, and the comparatively high levels of insolvencies among its supply chains add to that negative view, while also being wasteful and adding economic and social costs to the delivery of our built environment.

Prompt payment is ethical, breeds trust and collaboration, and helps foster value-adding activities that enhance not just the reputation of all the parties involved in a project, but also of the industry as a whole. It is difficult to ignore the industry business case for prompt payment.

The Construction Supply Chain Payment Charter

The UK Government has tried to address this with the Construction Supply Chain Payment Charter. The Charter is linked to the Construction 2025 strategy and calls for fair and transparent payment practices.

The standard is, for all new construction contracts to ensure payments remade to the supply chain not more than 45 calendar days from the end of the calendar month and from January 2018 for that to decrease to not more than 30 days.

This, of course, relies on companies signing up for this charter. At the time of publication of this course, it is not known how many signatories there are to this charter.

If you’d like to learn more about ethics in the construction industry, check out the full course online from Chartered Institute of Building Academy, below.