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Warning to new business department team of a upcoming "perfect storm"

The Specialist Engineering Contractors’ (SEC) Group – representing the largest sector in UK construction – has written to the secretary of state for BEIS, Andrea Leadsom MP, and new construction minister, Nadhim Zahawi MP, to prioritise action on fair payment for construction SMEs.

As an industry body that has campaigned for many years on fair payment, SEC Group intends to fully engage with the new BEIS team to ensure continuity in taking forward measures to improve payment security in the construction industry and eradicate poor payment practices.

Last year there were over 3000 insolvencies in the construction industry, more than for any other sector of the UK economy. The SEC Group believes that this figure is likely to be exceeded this year given the continuance of widespread payment abuse, the introduction of the VAT reverse charge on October 01 (which will reduce cash-flow to SMEs) and the likelihood of increased material costs after Brexit.

SEC Group’s position is that the Government only needs to introduce legislation to mandate the use of project bank accounts and to protect cash retentions; this will make a significant difference to the prospects for the majority of construction SMEs.

Both Kelly Tolhurst, who was re-appointed as small business minister, and former construction minister, Andrew Stephenson, were very keen to resolve the impasse on retentions.

During the course of a debate in the House of Commons on June 19 2019, Kelly Tolhurst said: “With regard to cash retentions, I have been clear that if industry cannot come to a consensus on a way forward, the Government will step in and take action.”

The SEC Group is concerned that in the wake of the Carillion collapse 20 months ago the expected progress in improving cash-flow security for firms in construction supply chains has not materialised.

28 August 2019

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