Debt in the construction industry
In very general terms, the word ‘debt’ refers to a sum of money that is owed. Being in debt is the state of owing money.
Construction 2025, the government's long-term vision for the future of the construction industry, cited equitable financial arrangements and certainty of payment as critical success factors for the industry and proposed a need to ‘...create conditions for construction supply chains to thrive by addressing access to finance and payment practices.’
The Housing Grants, Construction and Regeneration Act 1996 (also known as the Construction Act) includes provisions to ensure that payments are made promptly throughout the supply chain.
In addition, other initiatives have been introduced such as the prompt payment code, the construction supply chain payment charter, the Small Business, Enterprise and Employment Bill and project bank accounts.
The Late Payment of Commercial Debts (Interest) Act provides for simple interest to be payable on outstanding debts at a penal rate of 8% above the Bank of England base rate. Additional penalties can also be levied. The Late Payment of Commercial Debts Regulations bolster the provisions of the Late Payment of Commercial Debts (Interest) Act.
However, debt remains a very serious problem for the construction industry, which is heavily dependent on predictable cash flow. Late payment and non-payment continue to be common and can have a significant impact, cascading down an entire supply chain and putting businesses under financial strain.
Articles about debt on Designing Buildings include:
- Assignment of debt.
- Bad debt.
- Cash flow.
- Construction supply chain payment charter.
- Debt assignment.
- Fair payment practices.
- Housing Grants, Construction and Regeneration Act.
- Late payment.
- Overdue debt.
- Pre-action protocol for debt claims.
- Project bank accounts.
- Prompt payment code.
- Small Business, Enterprise and Employment Bill.
Featured articles and news
CIAT responds to the updated National Planning Policy Framework
With key changes in the revised NPPF outlined.
Councils and communities highlighted for delivery of common-sense housing in planning overhaul
As government follows up with mandatory housing targets.
CIOB photographic competition final images revealed
Art of Building produces stunning images for another year.
HSE prosecutes company for putting workers at risk
Roofing company fined and its director sentenced.
Strategic restructure to transform industry competence
EBSSA becomes part of a new industry competence structure.
Major overhaul of planning committees proposed by government
Planning decisions set to be fast-tracked to tackle the housing crisis.
Industry Competence Steering Group restructure
ICSG transitions to the Industry Competence Committee (ICC) under the Building Safety Regulator (BSR).
Principal Contractor Competency Certification Scheme
CIOB PCCCS competence framework for Principal Contractors.
The CIAT Principal Designer register
Issues explained via a series of FAQs.
Conservation in the age of the fourth (digital) industrial revolution.
Shaping the future of heritage
Embracing the evolution of economic thinking.
Ministers to unleash biggest building boom in half a century
50 major infrastructure projects, 5 billion for housing and 1.5 million homes.
RIBA Principal Designer Practice Note published
With key descriptions, best practice examples and FAQs, with supporting template resources.
Electrical businesses brace for project delays in 2025
BEB survey reveals over half worried about impact of delays.
Accelerating the remediation of buildings with unsafe cladding in England
The government publishes its Remediation Acceleration Plan.
Airtightness in raised access plenum floors
New testing guidance from BSRIA out now.