Mark Slaughter, founder and CEO of Renno, tells Project Scotland what a survey of 200 UK contractors reveals about where renovation payments really go wrong, and why reform alone will not fix it.
THE Commercial Payments Bill, the government’s plan to ban retentions and cap how long large firms can take to pay smaller suppliers, has put contractor cash flow back at the top of the agenda, and rightly so. As Ryan McCuaig noted in these pages, abolishing retentions could free up money tied to work that has already been valued and certified. That debate is largely a commercial construction one, framed around retentions and big contracts. But earlier this year we surveyed 200 UK contractors about getting paid, and most of them spend their days on residential renovation, working directly with homeowners. Their experience suggests the reform is aimed at a real problem, but not the one that dominates their working lives.
Disputes are the norm, not the exception
The first finding is blunt. 86% of contractors told us they have payment disputes with clients at least occasionally, and only 14% never do. Nearly a quarter, 24%, have escalated a dispute to legal action or small claims. On a home renovation that often means a contractor and a homeowner who started on friendly terms ending up in the small claims court over a kitchen. Disputes are not an unlucky edge case in this industry. They are a standard feature of how renovation payments currently move.
The surprise: scope, not slow payers
Ask most people why builders do not get paid and they will say slow-paying clients. Our data tells a different story. The single biggest cause of payment disputes is unforeseen costs and scope change, cited by 48% of contractors who have them. Late or missed payment came fourth, at 26%, behind client financial difficulties (31%) and project delays (29%).
Two of those categories plainly overlap, and taken together they come to more than scope change does. But they are different problems with different fixes. A client who cannot pay is a credit problem. A client who will not pay because the two of you no longer agree on what was agreed is a scope problem. Renovation generates far more of the second, and the second is the one that ends up in court.
In renovation this is instantly recognisable. The homeowner changes their mind, the job uncovers a problem behind the plaster, the brief grows halfway through. One contractor summed up the frustration for us: clients change their minds and want different things. He was describing his job rather than complaining about his customers. By the time it reaches the invoice, the damage is already done.
Why reform only goes so far
Banning retentions and capping payment terms attacks the late-payment end of the problem, which is real and worth fixing. But it leaves the larger trigger, scope and variations, untouched.
There is also a question of reach. The Bill’s construction provisions work by amending the Construction Act, and that Act has never applied to contracts with a residential occupier. So across much of the residential market there is no retention to ban and no payment term to cap, and the reform barely touches the work where these disputes are sharpest. Timing matters too. There is a two year transition in which new retention clauses can still be agreed, and a further year in which money can still be deducted under them. Even where the Bill does bite, it bites at the end of the decade.
Our data makes the same point from the contractor’s side, and McCuaig put it well: remove one source of leverage and the dispute does not disappear, it simply moves to a different stage of the contract. Reform changes where the fight happens. It does not, on its own, stop the fight.
What actually helps
The encouraging part of the survey is that contractors already know the answer, because most of them are quietly solving it themselves. 65% resolve disputes through direct negotiation rather than going legal. That is hours of unpaid admin, but it points to the fix: have the difficult conversation early rather than late.
Three things would do more than any single clause. First, agree the scope and the money for each stage up front, in enough detail that a change is obvious when it happens. Second, handle variations in writing, before the work rather than after. Third, tie payment to verified progress, so releasing the money and completing a stage become the same event rather than a negotiation weeks apart.
None of that requires legislation. It requires the industry to treat scope and payment as one problem rather than two. The firms in our survey that struggle least are not the biggest or best resourced. They are the ones who agree the terms clearly and revisit them the moment the job changes.
The bigger point
Reform is a good thing, and the direction of travel on retentions and late payment is the right one. But policy can only reach so far into a private contract between a homeowner and a builder. If we treat the Bill as the finish line, we will be disappointed when disputes simply carry on at a different stage. If we treat it as a prompt to fix how scope and payment are agreed in the first place, on commercial sites and kitchen extensions alike, it could be the start of something genuinely useful.
The full findings from our survey of 200 UK contractors are available for anyone who wants to dig into the numbers.
