A Construction Supply Chain Payment Charter that sets out payment terms of 30 days has been agreed by the Construction Leadership Council (CLC), the body set up to deliver the government’s industrial strategy for construction.
The charter sets out 11 “fair payment commitments”. These include a commitment to reduce payment terms to a supply chain to 30 days from January 2018. The charter also sets out stages before this: terms of 45 days from June 2015, and 60 days with immediate effect.
Other commitments made in the charter include not withholding cash retentions, not delaying or withholding payment, and making payments electronically.
Any organisation that becomes a signatory to the charter agrees to apply the fair payment commitments in its dealings with its supply chain; to be monitored for the purposes of compliance by reporting against a set of agreed key performance indicators (KPIs); and to consider the performance of its supply chain against those KPIs when awarding contracts.
Philip King, CEO of the Institute of Credit Management, will now lead work on the development of monitoring arrangements for the commitments made by signatories to the charter.
Companies represented on the Construction Leadership Council that have agreed to sign up to the charter are:
- Barratt Developments
- Berkeley Group
- British Land
- Imtech UK
- Laing O’Rourke
- Stanford Industrial Concrete Flooring
Peter Hansford, the government’s Chief Construction Advisor, said:
This charter signifies the Construction Leadership Council’s commitment to small and medium-sized business, and the important role they play in the construction industry.
Through the Council, the government is working very closely with industry to give businesses of all sizes the confidence to invest – securing high skilled jobs and a stronger economy for everyone.
Anna Stewart, Chief Executive, Laing O’Rourke and Mike Putnam, Chief Executive, Skanska said:
The work undertaken on the Supply Chain Charter has been an important part of what the Construction Leadership Council hopes to achieve by 2025. By publishing the charter, the Council is setting out a clear position, and is encouraging others to follow.
No 1 section of industry and no 1 representative on the Council can, in isolation, achieve the transformation we’re after - it will require everyone working together, across industry and government, including clients, contractors and the supply chain.
Kevin Louch, President of the National Specialist Contractors Council said:
Many within the industry, and not just specialist contractors, want to see 30-day payment terms on all construction projects, but we recognise that it will take time for large businesses to adjust their business models over the next few years.
Many clients already pay in 30 days and we would like them to make public their commitment to the new payment charter and give the industry the confidence to pass that payment through the supply chain to those delivering their projects on site. I am delighted to have played a role in delivering the charter and moving our industry forward on this fundamental issue.
Notes to editors:
The Construction Leadership Council is co-chaired by Business Secretary, Vince Cable, and Sir David Higgins, Chairman of HS2.
The Construction Leadership Council is committed to championing the charter’s principles, both through its businesses directly and more widely.
The aspirations set out in Construction 2025, the industrial strategy for construction are: a 33% reduction in both the initial cost of construction and the whole life cost of assets; a 50% reduction in the overall time from inception to completion for new build and refurbished assets; a 50% reduction in greenhouse gas emissions in the built environment; and a 50% reduction in the trade gap between total exports and total imports for construction products and materials.
The government’s long-term plan is to build a strong, more competitive economy and a fairer society.
Industrial Strategy gives impetus to the plan for growth by providing businesses, investors and the public with clarity about the long-term direction in which the government wants the economy to travel.
The first achievements and future priorities of the industrial strategy have been published and can be found here https://www.gov.uk/government/publications/industrial-strategy-early-successes-and-future-priorities.