On 1 September, a new corporate offence will come into effect regarding ‘failure to prevent fraud’, and research from Skillcast has ranked the construction sector as ready to handle it
The construction sector ranks as the third most prepared industry in the UK for complying with the Economic Crime and Corporate Transparency Act (ECCTA), achieving a readiness score of 783.2 out of 1,200.
The study analysed more than 37,000 data points from 2,000 private UK companies available through Companies House, across 10 sectors.
The study comes at a time when fraud is a hot topic, with contractors formerly working for HS2 Ltd being investigated.
There is still cause for concern
Just 5% of the 200 construction businesses analysed had overdue confirmation statements, and 4% had late account filings, however, there are still gaps in corporate governance as 34% of these companies had failed to name a Person of Significant Control. This breaches the transparency requirements laid out by the ECCTA.
There is also a low director turnover rate of 0.30 changes per year on average, but another average of 20 company name changes, a red flag for the ECCTA that risks investigation for regulatory evasion.
Furthermore, 44 instances of compulsory strike-off actions were found, and 108 company charges were found, with 58 still outstanding.
The most prepared sector, according to this data, is the technology sector with a score of 889.4.
“Without urgent action, these firms risk severe reputational damage”
The new law in September will hold UK organisations accountable for failing to implement rigorous anti-fraud measures.
It will apply to “large organisations,” defined as organisations with over 250 employees, and/or more than £36m turnover, and/or more than £18m in total assets.
Vivek Dodd, CEO at Skillcast, said: “The ECCTA places a clear legal obligation on large organisations in the UK to demonstrate they have reasonable procedures to prevent fraud, and that does not just mean having policies on paper. Businesses must be able to evidence undertaking detailed risk assessments, embedding fraud controls into daily operations, and ensuring visible, top-level commitment to compliance.
“The findings from our ‘ECCTA Regulations Report’ should serve as a timely reminder for the construction sector, despite their higher ranking. With less than three months to go until the new ‘failure to prevent fraud’ corporate offence requirements are enforced, many companies are operating in high-risk conditions that leave organisations exposed to serious criminal liability.
“Construction firms rank among the better-prepared sectors, behind technology and property and real estate, which shows they are taking clear steps to strengthen governance, while other industries are falling dangerously behind. Without urgent action, these firms risk severe reputational damage and financial fallout, making strong governance, due diligence, and company-wide fraud prevention training business-critical.”
The Skillcast report can be read in full here.
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