Payment delays causing strain

BUSINESSES in the construction and real estate sector are suffering the longest waits for their invoices to be paid, with delays now averaging more than 15 weeks, a study has found.

Research by the Asset Based Finance Association ( ABFA) reveals that firms in those sectors have seen waits for payment increase by 22 per cent in the past five years to 107 days, up from 88 days in 2008.

Long payment delays are putting continuing pressure on a sector that has not yet fully recovered from the collapse in the property market of 2008- 9, increasing the strain on firms’ cash flow and making them vulnerable to financial shocks, according to the trade group.

Jeff Longhurst, chief executive officer of ABFA, said: “Many businesses are finding that payment delays are getting worse rather than better, despite the economic recovery and moves to improve prompt payment practices.”

He believes that there has been a long history of delays in payment. “Despite numerous attempts by several governments to improve the situation, these figures show that the problem is actually getting worse,” he added.

“Long supply chains in industries like construction mean that the ripple effect of delays is likely to affect many other businesses further down, with SMEs hit the hardest. In an industry with high overheads in terms of materials and labour costs, this can be incredibly frustrating and difficult to cope with.”