09th January 2014
Look ahead to 2014: professor Rudi Klein calls early payment schemes ‘a cancer within the industry.’
Early payment schemes are now commonplace amongst Britain’s larger construction industry contractors, and these firms argue that the schemes provide them with greater financial flexibility.
Early payment schemes, however, have come in for heavy criticism from certain sections of the construction industry, and barrister and SEC Group chief executive professor Rudi Klein has become the latest to launch his own attack on the practice.
In an article for Building.co.uk, professor Klein condemned early payment schemes as both an ‘industry disease’ and ‘a cancer within the industry.’ Professor Klein’s outspoken criticism is only the latest in a long line of attacks on early payment schemes, which many believe are unfair to subcontractors and potentially hinder growth.
In the words of a review into early payment schemes by the Scottish government, ‘a scheme which requires subcontractors to pay a financing fee to access funds they should be receiving anyway is fundamentally fair.’ Many others share these sentiments, while Professor Klein argues that early payment schemes actually help to cement the culture of late payments within supply chain financing which has been part of the industry for years.
However, 2014 promises to ring change for the construction industry. As noted by professor Klein, impending legislation and government measures will help to mandate and control 30-day payment periods, providing subcontractors and suppliers with an opportunity to recover from the threat of non-payment.
Late payments have long been endemic in the construction industry, with Labour MP Debbie Abrahams claiming that a ‘culture of late payments’ is acting as an obstacle for small businesses and construction firms seeking expansion.
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