Construction suppliers are waiting longer to be paid and are increasingly facing cashflow and debt-related problems, a new report has revealed.
Funding Options, which published the research, found that small construction firms now have to wait more than 42 days on average for invoices to be paid.
It warned that continued delays and indifference from large companies could threaten financial stability of the supply chain and cost jobs.
The report follows the recent collapse of construction giant Carillion. It explains that Carillion’s payment policy was 120 days – meaning many suppliers were still waiting to be paid on announcement of the firm’s insolvency. It is now feared that some suppliers will receive as little as a “penny in the pound” for work or services supplied.
Unfortunately, this unduly long payment policy is all too common among larger businesses.
Across the industry as a whole, 2,633 firms working in the sector were recorded as going insolvent in 2016/17 – an eight per cent increase on the year previous.
Chief executive of Funding Options, Conrad Ford, said: “A single late payment can be an issue even for larger and more successful firms, and worsening delays could create more insolvencies.
“Carillion’s collapse sent shockwaves through the industry, affecting smaller suppliers who will now never get paid what they are owed.
“Construction businesses have high overheads and labour costs, and many cannot afford to wait for payment for lengthy periods.”
Earlier this month, the Federation of Small Businesses (FSB), which represents around 160,000 small and medium-sized enterprises (SMEs) in the UK, called on big businesses to end the practice of late payments once and for all.
The call followed new research which shows that more than four in five (84 per cent) small businesses report being paid late, with one in three (33 per cent) saying at least one in four payments they’re owed arrives later than first agreed.