Build UK Restates ‘Cashflow Contract’ Over Supply Chain ‘Bad Habits’

BUILD UK has reminded the construction industry of its cashflow obligations after some company’s ‘bad habits’ are remerging.

The organisation – representing construction clients, main and sub-contractors – says that it has evidence of some firms squeezing their supply chains, threatening cash flow and longer term survival in the industry.

In an update, Build UK states,

After everything the industry has been through over the last few months, and with more uncertainty ahead, the overriding message from the Construction Leadership Council (CLC) has been that our sector’s long-term resilience depends on working collaboratively.

It is therefore extremely disappointing to receive evidence that some companies are reverting to bad habits and squeezing their supply chains, rather than taking the opportunity to revolutionise the way in which construction projects are delivered.

Domino effect

In April, the CLC warned that if construction businesses invoked contractual and penalty clauses for delayed projects and withheld payments it would have a domino effect throughout the industry.

It further advised companies to consider reputational damage saying that “actions at this time will be remembered and that all firms should think hard about how their reputation could be damaged by not doing the right thing”.

De facto contract

The April CLC statement discusses a de facto ‘contract of obligation’ between industry and government, pointing out that taxpayer help for construction companies’ cash flow could not be obtained while at the same time those companies withheld payments from their supply chain.

The Statement reads, “In our letter to the Prime Minister, we called for an unprecedented range of support measures to ensure that cash continues to flow to and through the industry. The construction sector can only justify such support if cash continues to flow and liquidity is maintained.

Build UK restated in their update, “Every business, large and small, has a critical role to play in making sure that cash continues to flow throughout the industry”.