Late-payers threaten to demolish building firms
A QUARTER of small and medium-sized building firms are at risk of going out of business because clients do not pay their bills promptly.
One in four smaller construction firms surveyed by invoice processing firm Tungsten Corporation reported that late payments meant they faced the threat of having to cease trading.
The findings come as the industry is under increased pressure to meet the Government’s target of one million new homes by 2020, despite complaints from the Federation of Master Builders on Friday that a lack of skilled staff is hampering plans.
Many skilled labourers have left the UK and the number of apprenticeships is falling short.
Data from the Office for National Statistics on Tuesday showed that construction output shrank by 2.2 per cent in the third quarter, representing the sharpest contraction since 2012.
This was enough to drag down growth by more than 0.1 of a percentage point.
The Tungsten Corporation study also revealed that 42 per cent of building firms felt that the late-payment problem had not improved in the past 12 months, and 32 per cent suggested it had become worse.
The research follows a series of measures implemented by Government, including a payment charter for the industry, which saw major contractors, clients and the Government commit to paying suppliers within 30 days from 2018.
Despite the scale of the problem just 22 per cent of respondents had heard of the Prompt Payment Code, a voluntary scheme launched in 2008 to help raise standards in payment processing in the UK.
It has more than 1,800 signatories across the public and private sectors, and is administered by the Chartered Institute of Credit Management.
Meanwhile nearly half of UK SMEs are waiting more than 30 days to receive payments from their customers, according to research from Bibby Financial Services.
David Postings, chief executive of Bibby, said: ‘It is incumbent on the Chancellor to heed these warning signs before the year’s end if we are to stem this increasingly gloomy outlook.’