Presidents Column (January 2020)

The adage cash is king is never more real, cashflow is the life blood for any company. Recent developments with late payments, retentions and increases in the cost of Professional Indemnity insurance coupled with the proposals from government to impose reverse VAT on parts of the construction industry are stretching some companies to breaking point.

Many steelwork contractors are suffering from the doubling and trebling of PI insurance premiums. Insurance companies that are willing to offer cover are offering it for ‘aggregate’ claims and are no longer for ‘each and every’ claim. Undoubtably, the hardening
of the insurance market could have been affected by events at Grenfell that none of us want to see a repeat of, but I suspect there’s more to it than that. I’d like to see insurance companies take into account the professionalism and quality of specialist contractors.

All of BCSA’s members are subject to annual audits that focus on all the good practices that demonstrate good governance and professionalism.

In October 2020 government is proposing to introduce reverse VAT on construction services. I don’t think it will have many supporters and for many construction companies this will adversely affect both cash flow and working capital. BCSA lobbied for the postponement of the introduction of reverse VAT in 2019 and we’ll continue to lobby for it to be cancelled
altogether.

I keep hearing that the time to make payments is coming down. This is nonsense. Some main contractors are ‘gaming’ the system extending the time to make payment while others are issuing payless notices, as the 30-day period starts when the application for payment is agreed. Many of these issues could be addressed by the wider use of Project Bank Accounts, which clearly protects everyone the full length of the supply chain from clients to the specialist contractors.

The Government and the public sector in general could lead the way in enforcing the 30-day payment requirement in Public Contracts Regulations and, as in the devolved governments, mandate the use of PBAs for projects over a certain size. At the moment it seems to be an option, with the choice being taken very early as the project is being set up. Public bodies such as Highways England and Network Rail are leading the way on successfully using PBAs and abolishing retentions, lets have more of that please.

All of the above issues can and should be addressed and in my view the government should take the lead in demonstrating best practice on their projects. However, it remains to be seen if the new government has the will and determination to make these changes.  BCSA will liaise with the new minister for construction and the small business commissioner to make them aware of the major issues facing our members.