Cash is King in the UK Construction Industry

Abstract

The coronation of the King has long since passed and all celebrations are complete but in these straightened times cash is still the undisputed king in the UK construction industry. Cash flow is paramount and is the life blood of the industry. This was shown in the fall out of Carillion’s insolvency when it was the sub-contractors that had signed up to three months payment terms that went to the wall. Some might say that most small contractors operate without capital, on a “hand to mouth” basis and for that reason are always on the edge of insolvency. They might of course be forced into this position because the building employer or main contractor has not paid them. The principal mechanism for enforcement of payment terms by contractors in the UK is of course Adjudication. If they fall into insolvency, they will face a barrier to enforcement of the Adjudicator’s decision in an application for summary judgment in the Technology and Construction Court (TCC). This is because an Adjudicator’s award of payment to be made is only an interim decision and can be overturned upon a final determination of the dispute by the court. For this reason, the TCC will not enforce the Adjudicator’s decision for payment to be made to an insolvent contractor or sub-contractor unless measures are put in place to “ring fence” the money, so that it can be paid back to the employer or main contractor if they win the case in a final determination of the dispute by the court. What though is the position where the contractor has entered into a Company Voluntary Arrangement (CVA) to try and trade its way out of trouble?

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