Late payment forces business owners to stop own pay

Nearly half of small construction business owners and managing directors (47%) have had to stop their own pay because they were paid late by companies further up the supply chain.

That’s according to a new survey by the Electrical Contractors Association (ECA) and Building Engineering Services Association (BESA).

It found that almost three quarters of business owners said they had made sacrifices, with almost one in 10 employers (7%) saying they were forced to pay their own staff late. A total of 37% of company owners and directors said that had had to reduce their own salary, while 23% had cancelled company training and learning activity. Over one in three (36%) struggled to pay business taxes due to payment issues.

Nearly one in three (28%) said it caused staff morale to drop, while nearly one in six (15%) said it led to a fall in productivity. One in five said they were unable to replace broken equipment as a result.

Over nine in 10 respondents (92%) said their business had faced payment issues. Almost two-thirds (65%) said they were paid late frequently or very frequently.

ECA director of legal and business Rob Driscoll said: “This ground-breaking data shows the truly devastating effects late payment has on the lives of business owners, their staff, their children, and their wellbeing.

“With a lack of fair payment directly causing widespread mental health issues, abusive payment practices fundamentally remove the capacity for individuals to feel purpose or value in a sector which enables £540bn GDP within the wider UK economy. The data lifts the lid on the industry’s self-harming commercial behaviour.”

BESA director of legal and commercial services Debbie Petford added: “These figures are a timely reminder that unfair payment practices place significant and unnecessary burdens on owners of construction SMEs and their employees.

“Urgent reform is required to prevent companies inappropriately using retentions money owed to smaller businesses down the supply chain to prop up their cash flow. The status quo is both economically unsustainable and detrimental to the wellbeing of hardworking people in our industry.”

The survey was held in association with the Prompt Payment Directory. Companies from across the construction industry including electrical, plumbing, building, scaffolding, roofing, civil engineering, fire safety, painting and decorating, and interiors participated in the survey. The survey supporters are all part of a wider industry coalition pressing government to reform the practice of cash retentions in in construction.