Construction late payment is getting worse according to the latest data from Creditsafe. More than half of all business invoices sent to construction firms were paid late last year analysis has found.
The proportion of late invoices “significantly increased” to 52.9 per cent across the sector in 2022, a rise of 13 per cent compared with 2021.
Data company Creditsafe looked at 21 sectors and found that only two other sectors performed worse. These being water and waste at 58 per cent and mining and quarrying mining and quarrying.
More alarmingly, the construction’s year-on-year change was the worst of any of the sectors. That includes the hospitality sector which has been hit hard.
The company analysed more than 100 million invoices from accounts receivable departments across the two years to reveal the results.
Builders not getting paid
Builders are not just small limited companies. They are often sole traders or self employed individuals.
“Unfortunately, the industry is facing a tough time with fluctuating prices with margins being squeezed as prices go up, which has led to increased insolvencies,” he added. “SME builders are often at the bottom of the supply chain and can find themselves being paid late due to payment issues further up the chain, which is why it’s important that everyone is paid on time.
“What is needed is a genuine effort by government to ensure that the Prompt Payment Code is enforced, otherwise jobs and company liquidations will be at risk.”
Creditsafe UK and Ireland chief executive Chris Robertson said cashflow was often a “critical concern” for small businesses.
“They rely on a steady income stream to cover expenses and maintain operations. When a payment from a customer is delayed or not received at all, it can create a significant financial strain, and in some cases can even result in being unable to meet their financial obligations and possible closure,” he added.
Survival is the main goal for many SMEs
A survey reported last week that a quarter of SMEs see survival as their main goal in 2023.
Meanwhile, the vast majority – 75.2 per cent – of construction companies with fewer than 250 employees reported that their energy costs had risen over the past six months; 60.7 per cent noted an impact on profitability; and 43.6 per cent said they had to access additional finance purely to cover higher bills.
The squeeze is not only just affecting SME firms but also the self employed too. Not getting paid is not an option for many who operate hand to mouth as the saying goes.