The government has published details of the likely information that major contractors will have to publish about their withholdings.
Business Secretary Kemi Badenoch announced in October that major construction firms will be forced to report key details about the withholdings they hold as part of a crackdown on poor payment practices.
Now, a newly published impact assessment on the reforms suggests the rules will “capture a range of information”, including:
- Contractors’ retention policies, including the standard terms that apply to them, as well as their approach to releasing retention money to suppliers.
- The average number of days required to make retention payments, after practical completion and the end of the contractual-defects-liability period.
- The percentage of withholding payments paid in 30 days or less, between 31 and 60 days, and in 61 days or more.
- The percentage of outstanding retention payments that have not been paid within the agreed payment period.
- The average value of retained earnings per construction contract, as a percentage of the contract value.
The document adds: “These additional requirements will provide greater transparency and public scrutiny of large companies’ retention and payment practices and performance, as well as improve information to suppliers in the construction supply chain.”
A separate government response just released to a consultation on payment practice reporting states that Whitehall will work with industry to explore the final form statistical reports on withholding will take.
This will balance “the value of this information to companies in the supply chain, as well as the costs and administrative challenges of obtaining and reporting on this information,” he says.
The obligation to report withholdings will affect those businesses required to report their payment details under the Payment Practices and Performance Disclosure Regulations 2017.
These reporting rules should be tightened to force companies to highlight the value of unpaid invoices on agreed terms and in disputes.
A review currently being carried out by the Financial Reporting Council could also see new changes introduced requiring companies to include their payment performance reports in their annual reports.
Last week, Chancellor Jeremy Hunt also announced that Whitehall’s procurement rules would be tightened to “end the scourge of late payments”.
From April 2024, those bidding for government contracts worth more than £5m will have to prove they pay their bills within an average of 55 days or face being banned from work.
The following year the average time will be shortened to 45 days, with a 30-day period to be introduced in the future.
