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Trade group demands protection

Call for regulator to tackle late payments

Darrell MatthewsA trade group is calling on the Scottish Government to learn from the collapse of Carillion by appointing a late payments regulator to help small firms.

Select, whose member companies account for more than 90% of all electrical installation work carried out in Scotland, wants a Chief Construction Advisor (CCA) to supervise aspects of the construction industry, most urgently on the issue of late payment. 

Select acknowleges that Holyrood has made some progress on public sector procurement issues but argues that more needs to be done. 

Its call follows a pledge by Scottish Labour yesterday to appoint a Small Business Minister and force companies working on public sector contracts to pay suppliers within 30 days.

Darrell Matthews, MD of Select said: “The collapse of Carillion sent shockwaves through the UK construction sector.

“Whilst Scotland was perhaps in a better position than the rest of the UK, we believe that the Scottish Government should treat this as a wake-up call and put protections in place.

“Our members believe that the appointment of a CCA, acting as a ‘construction tsar’, to enforce already existing legal protections by ensuring repeated late payers are identified, monitored and if necessary, punished, would be a clear signal of intent by the Scottish Government.”

Insolvency ‘domino effect’

An estimated 17% of companies in Scotland may have suffered a financial hit following the insolvency of a customer, supplier or debtor in the last six months, according to research from R3 in Scotland, the insolvency and restructuring trade body.

Across the UK the figure stands at more than one in four (26%).

The report found the financial impact of the insolvency of another business was described as “very negative” by 8% of Scotland’s companies, and as “somewhat negative” by 9% of respondents.

The figures are seen as evidence of the so-called ‘domino effect’, where one company’s insolvency will increase the insolvency risk for others. They follow a 28% rise in corporate insolvencies in Scotland in the first three months of this year compared to the previous quarter, and a spate of high profile insolvencies involving large companies such as Carillion and Toys R Us.

Across the UK, construction businesses were the most likely to say the insolvency of another firm had had a negative impact on their finances in the last six months, with almost half (47%) reporting a hit. Nearly a third (32%) of UK manufacturing companies and 31% of companies in the retail sector reported a negative impact.

R3 in Scotland chairman Tim Cooper, a partner at Addleshaw Goddard, said: “No business exists in isolation, and every headline-grabbing corporate insolvency will have consequences for numerous other enterprises.

“After the news of the Carillion liquidation broke, for example, R3’s members reported an immediate upsurge in requests for advice from companies with links to Carillion. Many retailers have hit the headlines as a result of their current difficulties, causing less visible struggles at other firms, such as suppliers and service providers.

“Regarding the challenges in the construction sector, official figures show that construction has been contracting over recent quarters, with weaker growth in house prices slowing output among housebuilders. Falling spending on infrastructure has reduced the sector’s contribution to GDP.”

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