Lifting the lid on the 'Pandora's Box' of the North East construction industry

Owen Pugh Group chairman John Dickson says sector is riddled with unethical behaviour when it comes to paying suppliers

John Dickson
John Dickson

The boss of one of the North East’s best-known construction firms has spoken of his frustrations at companies using a range of techniques to avoid paying on time.

Following the launch of The Journal’s Pay Fair campaign, John Dickson, chairman of the Owen Pugh group, said there was a culture of “lies, deceit and hypocrisy” he believes is rife in some parts of the construction sector

Praising The Journal for taking the lead on raising awareness of the situation, he also called for the public sector to set a better example and for educational institutions to stress the role of consistent profits in business sustainability.

Headquartered in Dudley, North Tyneside, The Owen Pugh Group, which employs around 400 people, consists of a number of privately-owned companies, working across civil engineering, subcontracting and supply. Most of its suppliers come from its own workforce, who are paid on a weekly basis.

The group also purchases a considerable amount of fuel, for which its bills are settled every fortnight.

“So when our customers delay their payments to us, we can’t delay our payments to our suppliers,” Mr Dickson said. “It puts us in a particularly difficult situation.

“Having said that, we have lots of other suppliers for plant equipment, spare parts, building materials and things like that. We try very hard to make sure they are all paid on time as we know our suppliers depend on us.

“We do, however, get in an unfortunate position every now and then, usually because our bigger customers are unable to pay us on time. When that’s the case, we ring them up, explain the situation and ask for more time.”

Mr Dickson said there notable “guilty parties” within the construction industry that posed an ongoing challenge for the group.

One supplier, for instance, insists on 30-day payment terms when it is owed money, but sets 60-day terms when Owen Pugh has carried out work for it.

“I consider that rank hypocrisy and it is rife in this industry,” Mr Dickson said.

He gave another example of a property developer who confessed he was unable to pay only after Owen Pugh had carried out around £100,000 of work for him.

The man still owes the firm around £97,000, but, in Mr Dickson’s estimation, the law has simply put barriers up when it comes to chasing the money - in contrast to what would happen in a case of theft outside of the business world.

When it came to payments, there were essentially two problems, he added - payments that arrived after the specified timeframe, and unreasonable timeframes themselves.

Mr Dickson said: “To some extent, I don’t mind how long a customer takes to pay me, as long he pays me when he said he would in the contract. In our business, every customer has a different contract.

“So if customer A says he will pay within 56 days, as long as he does that, then I’m relatively happy.

“But one big customer who promises to pay within 65 days does not actually do that, and we could end up with payments arriving up to 60 days late. That is the worst of all.

“If they had told me at the beginning, it could have been built into the pricing and cashflow forecast. When you don’t pay when you say you’re going to pay, that’s really wrong.”

Part the reason the sector was so badly hit, he said, was that some larger companies simply couldn’t afford to pay their suppliers on time.

The nature of the business - with firms either winning £1m of work or getting nothing at all, for example - also added to problem.

“I would love to say to say to some of these people: ‘We’ll never work for you again’,” Mr Dickson said. “But if we did that, then we’d be forced to make redundancies.”

Further legislation, he suggested, would be unlikely have much of an impact as far as tackling the problem was concerned.

Instead, institutions such as colleges and universities needed to stress the role of profit, as well as the likes of environmental and community credentials, when discussing sustainability.

The public sector, likewise, should consider quality as well as price, checking its supply chains so other regional firms were not hit by late payments on getting involved in the work.

The Owen Pugh Group would also be signing the North East Institute of Business Ethics’ (NIBE) Business Ethics Pledge and wholehearted supported The Journal’s campaign.

“I applaud what The Journal is doing as it can be difficult for people to say anything about this issue,” Mr Dickson said. “One wrong word and you could find you won’t get anymore business from some of these customers. But if The Journal can lift the lid on it, that could make a real difference.”

To support the Pay Fair campaign, visit http://www.nibe.org.uk/ and sign the Business Ethics Pledge.

Sign up today to support Pay Fair

Companies serious about tackling the ongoing blight of late payments can show their support for The Journal’s Pay Fair campaign by signing up to a pledge created created by The North East Institute of Business Ethics.

Set up in May 2013, the body acts as an independent regional resource that aims to place ethical behaviour at the heart of the North East’s business community.

Drawing on research from the London-based Institute of Business Ethics, it offers access to a community of people interested in the subject, thought-provoking events featuring practical advice, and the opportunity to contribute to a collective drive to transform working environments for the better.

The organisation is overseen by an influential steering group and has the backing of Newcastle University Business School.

By signing the Business Ethics Pledge, firms agree to join with others to discuss the value of business ethics in society and help transform their working environments for the better.

NIBE co-chair, the Reverend Canon Glyn Evans, said: “Each day we are faced with choices, some of which challenge us ethically. How do we make decisions about how we behave? How do we talk through moral and ethical dilemmas? Where could we find help or a listening ear?

“This is the opportunity that NIBE presents through its steering group, events programme and pledge that we are encouraging businesses and organisations to sign.

“Working together and leveraging our networks we want to provide an opportunity for businesses large and small, academics, professionals and representatives from the public and voluntary sectors to meet on neutral ground, query existing practice and put ethics at the centre of decision-making.”

To sign the pledge, visit http://www.nibe.org.uk/

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