Construction firms brace for late payment crackdown

The amendments introduce a 30-day payment requirement for contracts awarded under the Procurement Act 2023, alongside technical changes aimed at strengthening the Bill’s implementation, all which could have significant implications for construction businesses.

Carly Thorpe, Construction & Engineering Partner at Walker Morris, said: “The latest amendments reinforce the Government’s commitment to tackling late payment, an issue that has long placed significant pressure on businesses throughout the construction supply chain. Measures such as the proposed payment caps, mandatory interest on late payments and restrictions on retentions have the potential to improve cash flow and provide greater certainty for contractors and subcontractors.

“However, businesses need to pay attention not just to what’s in the Bill, but also what has been left out. Proposals including AI tools to monitor payment practices, an open payment data register, a blockchain pilot for construction retention records, and ESG reporting frameworks have not been incorporated into the amended legislation. This reflects the Government’s decision to focus on the core legal framework first, with practical details expected to follow.

“Businesses will therefore need to keep a close eye on secondary legislation to ensure their payment practices, internal systems and construction contracts remain compliant. Taking proactive steps and seeking early advice will help organisations prepare for the changes ahead and reduce the risk of falling foul of the evolving requirements.”

This development builds on the issues we explored in our earlier article, Late payment reform: The future of retention in construction, which examined the Government’s proposals to reform retention practices and improve payment certainty across the construction supply chain.