The Electrical Contractors Association (ECA) has called for signatories to the Prompt Payment Code to commit to paying 95% invoices from smaller businesses within 30 days.
The call came in response to a government consultation on proposed changes to the Prompt Payment Code.
The ECA has also suggested that its recommended approach be backed up by an enhanced monitoring and reporting process. It said it wanted to see those firms frequently breaching the Code to face fines, which it claimed could help drive compliance due to their own financial performance being impacted.
And it said it supported the use of a Prompt Payment Code logo by those following the rules, to highlight their responsible business culture.
Under plans announced by the Cabinet Office last week, contractors must be able to demonstrate that at least 85% of payments are made within 60 days or be barred from bidding for contracts.
The rules, coming into effect in April 2021, increase the current payment provision threshold of 75%, with a view to increasing it further over time, up to 95% – although no timeframe has been given for this.
Rob Driscoll, ECA director of legal and business, said: “The introduction of a new 30-day requirement for payments to smaller business could represent a fundamental shift in the balance of power and liquidity of SMEs, who form the backbone of the UK construction industry.”
“A reformed Code will transform it to becoming a champion of small business and fair commercial behaviour in these challenging times.”
Steve Bratt, ECA CEO, added: “While tightening the payment requirements is a positive move and is to be applauded, let’s not forget that the law already requires payments on public contracts to be made within 30 days.
“Prompt and fair payment is essential to ensure the health of the construction supply chain, particularly in the current commercial environment, and 30 days should be the aspiration.”
