Last edited 05 Feb 2021

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ECA Institute / association Website

The real impact of late payment

Brain diagram ECA mag winter 2019.jpg
An industry-wide survey run by ECA and BESA in 2019 revealed the devastating effects of late and unfair payment on mental health in construction.


[edit] Introduction

As mental health makes its way to the top of many construction companies’ agendas, thanks to cross-industry initiatives such as Mates in Mind and Mind Matters, the links between slow and obstructive payment practices and poor mental health are beginning to surface.

A recent survey, aimed mainly at business owners, CEOs and managers, was run by ECA and BESA, (Building Engineering Services Association) in association with the Prompt Payment Directory and 25 other industry bodies. The survey received 613 responses in total, with 213 of these from business owners and sole traders. Of these respondents, over nine in 10 respondents (92%) said their business had faced payment issues and nearly two-thirds (65%) said they were paid late frequently or very frequently.

“Everybody expects business to deal with everyday pressures, but stress and other mental health impacts come from sustained and excessive pressure,” said Paul Reeve, ECA’s director of CSR.

“It’s absolutely clear from these findings that poor payment is a serious cause of mental health issues across the industry and that the problem, far from being isolated to certain individuals, is commonplace among top management.”

[edit] Broken lives

The survey showed that a remarkable nine out of 10 business owners across construction suffer an array of significant mental health problems due to the pressures of late or unfair payment, including stress, depression, extreme anger, anxiety and panic attacks.

Unfair payment practices also have a significant impact on employees right across a business, including directors, managers and other employees. Of all the respondents, four said they had attempted suicide as a result, while 80% reported a mental health issue.

Furthermore, over four in 10 (41%) of all respondents said that payment issues had strained their relationship with their partner, with 5% reporting it caused it to breakdown entirely

[edit] Broken businesses

The survey also shed light on the concrete business impacts of late payment. More than a quarter (27%) of all survey respondents said that they had been, or had almost been, brought to the brink of bankruptcy or liquidation as a direct result of late payment.

The most common measure taken by business owners to cushion the blow of late payment to employees was to cut or stop their own pay for a period of time, with close to two thirds (60%) having done so. A quarter (24%) had delayed or cancelled staff social events, and more than one in 10 (14%) had stopped or reduced staff perks such as company phones, cars or health insurance.

Alarmingly, almost one 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.

“These problems quickly knock on to employees and families alike,” added Paul Reeve. “Findings such as these mean that clients and other buyers need to greatly improve their approach to supply chain payment and it’s a sad reflection on the industry that it will probably need legislation to achieve it.”

“Systemic payment abuse causes broken lives and even broken buildings, and it must be stamped out,” said BESA CEO David Frise. “The economic damage of these practices is well known but this survey has shed light onto its devastating human cost. Thousands of owners and workers of SMEs have struggled and suffered with this abuse for too long.”

The survey supporters are all part of a wider industry coalition pressing government to reform the practice of cash retention in construction. Cash retention is widely considered to be one of the most unfair and abused payment practices across the industry.

[edit] What is being done?

ECA and BESA, along with other bodies, continue to push the issue of fair payment towards the top of the government agenda. One example is assisting with the drafting of the Aldous Bill, a private member’s bill which aimed for the mandatory ring-fencing of cash retention (money held back by larger contractors and clients from subcontractors if defects arise).

Some £7.8bn of retention money has gone unpaid for the last three years.

“The next government must take immediate action on cash retentions and other payment abuse, by legislating for change,” said Rob Driscoll, ECA’s director of business. “Doing so will help to address the serious findings in this survey and actually help construction to achieve its dual aspiration of delivering excellence for clients and being an industry that’s attractive to new talent.”

[edit] About this article

This article was written by Omar Khalil of the Electrical Contractors' Association (ECA). It previously appeared in the Winter 2019 issue (No.42) of ECA Today magazine under the title ‘Broken lives & broken buildings: the real impact of late payment’. It can be accessed HERE.

Other articles by the ECA on Designing Buildings Wiki can be accessed HERE.

[edit] Related articles on Designing Buildings Wiki


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