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Last edited 19 May 2021
Business owners forced to stop paying employees due to late payment
|An industry-wide survey reveals the devastating impact of unfair payment on construction businesses.|
Nearly half of small business owners and managing directors (47%) had to stop their own pay due to the impact of unfair payment practices by their buyers, according to new survey findings from engineering services trade bodies ECA and BESA.
Overall, three-quarters of business owners said they had made sacrifices, including reducing their own salary (37%), and cancelling company training and learning activity (23%). Over one in three (36%) say they have struggled to pay business taxes due to payment issues.
Alarmingly, almost 1 in 10 employers (7%) were forced to pay their own staff late – an action which can have devastating effects on employees, who may then miss mortgage or rent payments as well as other vital overheads such as utilities and loan repayments.
ECA Director of Legal and Business Rob Driscoll said:
“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.”
The impact of unfair payment practices also had further knock-on effects to businesses. 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.
“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 also revealed that, as a direct result of late and unfair payment, over nine in 10 business owners in construction are suffering from a range of mental health issues, including anxiety and depression, linked to the actions described above.
The survey was held in association with the Prompt Payment Directory. Survey supporters cover a range of construction activity, including electrical, plumbing, building, scaffolding, roofing, civil engineering, fire safety, painting and decorating, and interiors. They include SELECT, the Scaffolding Association and Chartered Institution of Civil Engineering Surveyors (see Notes to Editors for full list).
The survey supporters are all part of a wider industry coalition pressing government to reform the practice of cash retentions in in construction. Cash retentions is widely considered to be one of the most unfair and abused payment practices in the industry.
 BESA and ECA – working together to represent the engineering services sector
- Support and awareness of the Aldous’ Bill is being coordinated by the Building Engineering Services Association (BESA) and leading electrotechnical and engineering services body ECA.
- ECA and BESA collaborate on a range of issues in the engineering services sector. The partnership brings together the two leading associations representing engineering services; some 4,000 businesses with a combined annual turnover of almost £10bn.
- Together, ECA and BESA cover a range of engineering, design, installation and facilities management activity, including electrical, heating, plumbing, energy management, micro-generation, ductwork, ventilation, fire and security, and wireless systems.
- Joint work includes representation in key areas like contracts, procurement, payment, and health and safety.
- Overall, the engineering services sector accounts for some 40% of UK construction/maintenance turnover.
This survey, aimed mainly at business owners, CEOs and managers, was run by ECA and BESA in association with the Prompt Payment Directory. The survey received 613 responses in total, with 213 of these from business owners and sole traders. It was held between 12 September and 10 October 2019.
- Asbestos Removal Contractors Association (ARCA)
- Association of British Certification Bodies (ABCB)
- Association of Geotechnical & Geoenvironmental Specialists (AGS)
- British Blind and Shutter Association
- British Coatings Federation
- British Constructional Steelwork Association (BCSA)
- British Drilling Association (BDA)
- Chartered Institution of Civil Engineering Surveyors
- Confederation of Construction Specialists
- Confederation of Roofing Contractors
- Federation of Environmental Trade Associations (FETA)
- Fire & Security Association (FSA)
- Modular and Portable Building Association (MPBA)
- National Federation of Builders (NFB)
- Refrigeration Compliance (REFCOM)
- Scaffolding Association
- Scottish & Northern Ireland Plumbing Employers’ Federation (SNIPEF)
- SEC Group
- Single Ply Roofing Association.
ECA is the UK’s largest trade association representing electrical, electrotechnical and other engineering contractors in England, Wales and Northern Ireland at regional, national and European level. ECA member-companies are rigorously assessed before membership is approved.
Member firms have a combined turnover in excess of £6 billion annually. Member firms carry out design, installation, inspection, testing, maintenance and monitoring activity across the domestic and commercial sectors. This ranges from power and lighting to data communications, to energy efficiency and renewables, as well as the design and installation of cutting-edge building control technologies.
ECA’s near 2,700 members range from SME electrical firms to nationwide engineering contractors and building services firms that employ thousands of professionals on major UK projects. ECA members also support over 5,000 apprentices annually.
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- 37% of SMEs suffer mental health problems due to pay issues.
- Causes of construction disputes.
- Construction invoice fraud.
- Construction supply chain payment charter.
- Fair payment practices.
- Main contractor’s discount.
- Mechanic’s lien.
- The Late Payment of Commercial Debts Regulations 2013.
- Payment notice.
- Payments to nominated sub-contractors.
- Pay less notice.
- Project bank accounts.
- Prompt payment code.
- Provisional relief.
- Scheme for construction contracts.
- Scottish and Northern Ireland Plumbing Employers’ Federation SNIPEF.
- Small Business, Enterprise and Employment Bill.
- The causes of late payment in construction.
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