Industry, and anticipate what is to come, it is clear that our sector is facing a number of major uncertainties. On the one hand, much of the industry continues to grow steadily, and the government’s Industrial Strategy and the Construction Sector Deal point the way to a bright future where we can harness innovative technologies and clean growth models.
On the other hand, in what seems like a never-ending bad news story, material prices continue to rise, skills shortages heighten wage inflation and suppress house building, and Brexit is creating short and long-term uncertainties.
However, above all the events of this year, the compulsory liquidation of Carillion is the most significant, as it offers the government an opportunity to reassess how it procures both products and services from the private sector. Carillion’s demise laid bare the toxic culture of late payments entrenched within the construction industry. I know of a small building firm that was owed more than £200,000 by Carillion when it went under, and another FMB member revealed that they had waited as many as 270 days for payment from a major contractor.
Fortunately, these particular firms were able to weather the storm, but many smaller companies went down with the sinking ship. Poor payment practices are endemic in the industry and, inevitably, it is the smallest companies that are the hardest hit.
But the government can and should lead the way in enforcing good payment practices in its supply chain. As a signatory of the Prompt Payment Code, Carillion should have paid 90 per cent of invoices within 60 days, but the reality appears to have been very different. The government must penalise those engaged in poor payment practices and, wherever possible, open up opportunities to a more diverse range of smaller firms. Not only will this prevent another Carillion-style disaster, it will also have significant benefits.
In construction, it is the small local firms that train the bulk of our apprentices. Small firms also reinvest profits in local economies, helping spread the value of large government contracts across the whole of the UK. The government must seize this opportunity for root and branch reform – the time for radical action is now.