Late payments are having a crippling effect on small- to medium-size construction businesses crucial to the sector’s future.

According to the National Federation of Builders (NFB), public sector clients, even including central government, simply do not pay on time. This leaves regional contractors and SMEs, often subcontracted via larger construction companies, facing retention payments of up to £10.5 billion.

Approximately £22 billion of annual SME turnover is paid late and the Government’s approach to procurement and frameworks are putting SMEs and contractors at a further disadvantage, and have done so for years now.

Retentions and late payments are essentially stunting industry growth says NFB chief executive Richard Beresford: “Late payment and retention of funds remain a problem for UK construction companies, despite widespread recognition that these practices are unacceptable.”

He continues to explain that in an effort to provide some stability, Colmore Tang Construction, both a member of the NFB and an Eque2 customer, is offering early payment to subcontractors affected by Carillion’s collapse, setting a good example of collaborative leadership in construction.

While the Construction Act outlines payment deadlines and provides an adjudication process, the NFB notes that many companies are reluctant to take action for fear of compromising future work.

Starting contracts with transparency and timely payments in mind from the beginning can both reduce risk for SME contractors and improve subcontractor relationships. Construction software such as WebContractor from Open ECX, Eque2’s sister company, is an innovative online portal that offers end-to-end project management and visibility of the applications for payment process.

The portal automates the application process for subcontractors, managing the processing and calculation of applications through to approval, payment and audit. Full visibility of the payment application process saves subcontractors the frustration of chasing payments whilst also saving contractors the time spent dealing with enquiries. Plus, integration of key dates and notifications ensures you are fully compliant with the UK Construction Act.