Andrew Dixon, policy advisor at the Federation of Master Builders (FMB), answers Construction Manager’s questions on the Enterprise Bill announced in the Queen’s speech.
Andrew Dixon
What do I need to know about the Enterprise Bill?
AD Announced by business secretary Sajid Javid a couple of weeks ago, the Enterprise Bill aims to support SMEs “by cutting red tape and making it easier for small businesses to resolve disputes quickly and easily.” This includes a new ‘Small Business Conciliation Service’ that will help SMEs settle their disputes with larger firms. It is also reported to include the widening of the powers for representative bodies to act on behalf of their members to challenge unfair business practices.
We hope that this will play a significant role in helping combat the late payment practices that have plagued the construction industry for far too long. Late payment is a major barrier to small and micro firms forming part of the supply chain for large public and private sector contracts. By solving this issue, not only are you encouraging good business practice and protecting SMEs, the Government will also open up public sector contracts to thousands of construction SMEs that have previously been left out in the cold.
What more do we know about the Small Business Conciliation Service?
AD We do not have a great amount of detail regarding the proposed structure or processes of the Small Business Conciliation Service. However the principle of the service is a sound one. Having recourse to independent assessors for disputes should give small businesses the ability to challenge unfair payment terms without being unduly penalised.
The age old saying is that SMEs are the back bone of the economy. In construction, they are far more important than that. Hopefully this new service will provide an additional source of support which small construction firms, who operate in an often fiercely competitive market, sorely need.
We do not have a great amount of detail regarding the proposed structure or processes of the Small Business Conciliation Service. However the principle of the service is a sound one.
If it is to make an impact in our sector, what characteristics would it need?
AD It would need to offer a relatively straightforward procedure, accessible without being too open to abuse or time-wasting, that is at the same time binding, widely accepted by all parties and which is able to reassure smaller firms and subcontractors that they will not face adverse consequences in the event of a dispute.
Do you think the idea of 3rd party intervention could be effective in the construction sector?
AD If it can manage to meet all the above criteria, then maybe, yes!
If I said “I’d heard it all before”, would you call me a cynic or a realist?
AD I would call you a realist. Poor payment practices have long been a feature of the construction industry. Successive Governments have failed to adequately combat this damaging practice, and every Government says they will cut red tape!
The last Government made some small steps in the right direction in terms of late payment, notably, the new duty to report on payment terms that will be imposed on all large firms from April 2016. Transparency is a step in the right direction, but it will have little impact on the most shameless late payers.
That doesn’t mean that this is doomed to fail. Sajid Javid was absolutely right to address this as a major issue at such an early stage in the new Government. With the whole small business community behind him, we should withhold our cynicism and look to see how we can make this proposal a genuine success.
