Once again, a surfeit of worrying news this month. Poor payment practice is an ongoing theme, with the NSCC appealing to government to intervene on the new practice of reverse factoring and a cross-party group of MPs examining the economic impact of late payment. Meanwhile, the Prompt Payment Code, with its commitment that signatories stick to “contract” terms – even if those happen to be 60 days – increasingly looks like a PR-led panacea.
When the downturn started to bite, we saw an epidemic of Tier 1 contractors writing to supply chain members demanding better terms. Four years of austerity later, there’s a feeling that Tier 1s long ago squeezed out any surplus value – and that they’re now resorting to extended payment times, pay when paid and/or the new option of Supply Chain Finance to improve their own beleaguered margins.
There’s plenty of other news that forms part of the background to this situation. We’ve had the Construction Products Association predicting a further 2.1% drop in output this year, and lacklustre results from Vinci and Sir Robert McAlpine. Then there’s the latest employment statistics, showing that construction employed 20,000 fewer people in Q4 2012 compared to 2011 and the Federation of Master Builders reporting further job cuts among its members in Q1 2013.
If every main contractor adopted Laing O’Rourke’s practice of payment within 21 days, then construction’s SMEs would find it a huge advantage to be able to pay their own invoices more easily or even invest in the future more readily. That culture change is where we want to be, where the pain and gain of contracting is spread more equally.
But it still wouldn’t help SMEs find work, and it wouldn’t stop other companies undercutting them. We’d still have insolvencies, because we’d still have overcapacity in the industry.
So how do we respond to that? Do we accept that there are just too many construction SMEs, products, we have been reminded, of the Thatcherite enterprise economy of the 1980s and 90s? The construction sectors in other European economies look very different, after all, with far more “vertical integration”.
Or do we power up the SMEs to march forward into construction’s future, the brave new world of BIM? That’s the strategy of government, which backed the launch of the industry’s new BIM4SMEs group last month with an address by Chloe Smith, the Cabinet Office minister responsible for the Government Construction Strategy.
That’s where the CIOB’s new Talk Construction event comes in. The conference in November (see page 8) is a chance to grasp the really difficult issues, and face up to the difficult choices. To discuss with government what it really wants, what the industry can offer, the price of action and the price of inaction.
