The National Federation of Roofing Contractors (NFRC) has spoken out about Travis Perkins extending its standard payment terms, a move that undermines progress the construction industry has made in improving payment practices, it says.
NFRC says that the entire construction sector has worked hard over recent years to shorten payment periods to improve productivity and stability and reduce insolvencies.聽
鈥淐onstruction continues to have the highest insolvencies of any UK sector, an alarming figure which is in large part driven by long payment terms,鈥� said NFRC director of membership Richard Miller. 鈥淓xtending payment terms shifts financial risk through the supply chain and creates additional strain for smaller suppliers and contractors who are already facing tight margins.鈥�
Government has set a clear expectation by capping its own standard terms in public procurement at 30 days and also through the Fair Payment Code, which grants gold awards to businesses that pay at least 95% of invoices within 30 days. NFRC feels that responsible companies in the private sector should follow this example, supporting healthy cash flow throughout the supply chain rather than holding onto payment to boost their own liquidity.
NFRC members recently raised concerns about long payment terms in response to the government鈥檚 Late Payments: Tackling Poor Payment Practices consultation, warning that some businesses may use the maximum 60-day term as a default rather than a ceiling, especially if cash flow tightens when other payment loopholes are closed.
For this reason, NFRC has called on government to reduce the statutory maximum payment term to 45 days, with the ambition of reducing to a 30-day maximum within five years.
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