Government has now adopted the view that the role of the Small Business Commissioner should be strengthened, with powers akin to the Groceries Code Adjudicator, taking responsibility for company compliance with the Prompt Payment Code.
This is something for which SEC Group has strongly argued, and it expects more detail on these proposals in the forthcoming consultation.
However, SEC Group had hoped that the Department for Business, Energy and Industrial Strategy (BEIS) would proceed further with the mandatory Prompt Payment Code and reduce the maximum payment terms to 30 days (currently at 60 days), in accordance with the Public Contracts Regulations 2015.
SEC Group agrees with the government’s intention to bring greater transparency on how supply chain finance is reported in company accounts, as this was something it had suggested as one of the lessons to be learnt from Carillion’s collapse.
Against a background of a worsening financial crisis in the construction industry, with the balance sheets of the largest construction companies showing increasing fragility, SEC Groups says effective measures are now required to improve payment security. It believes it is now imperative that government legislates to mandate the use of project bank accounts (PBAs) and ensure that retention monies are secured in a separate trust account or scheme.
Rudi Klein, SEC Group chief executive, said: “We believe that Kelly Tolhurst (the Small Business Minister) is sincere in wanting a change in payment culture. We are pleased that she intends to act on the issue of cash retentions in absence of industry agreement on a solution. We also know that she is very sympathetic to the notion of PBAs.
“Statutory protection of retentions monies and mandating PBAs will transform the lives of the overwhelming majority of small firms in the industry. ”