Businesses in the uk construction projects are facing increased pressure from delay, average wait of 69 days to the payments for their invoices to be paid.
An analysis of 13,213 UK construction sector firms found that they confronted an average wait of 69 days for their invoices to be paid over the previous year, marking an 8% rise from the 64 days wait recorded in 2014/15.
The analysis flagged that a single late payment can prove a headache even for successful firms, if a major client delays a payment significantly. If the delay coincides with a major bill coming in, such as a tax or lease installment, the knock-on effect can be even more extreme.
In the UK, currently some 30% of all late payments are in the construction sector. There is £30 billion owed in outstanding invoices to small and medium sized building firms.
An earlier study from the Building.co.uk website recorded that up to 16% of small firms’ annual turnover was stuck in money owed in unpaid invoices.
As an industry with squeezed margins and tightening cash-flows, construction is prey to late payment, and many smaller firms fall victim to larger companies’ cavalier payment practices. Let’s take a look at the charge of delay payment.
Average days wait for invoice payment
There is a wide range of choices out there for small businesses in the construction sector seeking funding – invoice finance, asset finance, crowdfunding and peer-to-peer lending can all provide the liquidity businesses need. Unfortunately, small businesses leaders often don’t know which sort of finance is the best fit for a particular need, or who is out there to provide it.
The Department for Business, Energy & Industrial Strategy (BEIS), has announced the introduction of new late payment legislation designed to make the workings of larger companies more transparent.
This will mean them having to disclose payment terms and resolution processes, along with imposing limits on payment periods.
There should be a sense of urgency to any action: many SMEs in the construction sector employ local workers and train local apprentices. They are grassroots businesses, contributing to their immediate economies. Late payments ultimately jeopardize this economic growth.
IHS Markit found a slight boost to the construction sector last month, saying that house building was “the sole bright spot in an otherwise difficult month”.
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