LATE payments are the biggest threat to construction firms, new research has found.
The research by payment provider Lopay, a partner of the National Federation of Builders, analysed the experiences of small construction firms across the UK and found that half ranked late payment as the greatest danger to their business. That’s twice as many who see falling demand as the biggest threat and nearly triple the number most concerned by the rising cost of materials.
The research also revealed that a third of builders have downed tools and refused to resume work until an outstanding invoice is paid, and 28% have threatened legal action in order to get a customer to settle up.
The findings come after official statistics showed 4,165 construction firms went bust in England and Wales in the year to the end of March, the highest level since the financial crisis.
Lopay’s research found that 70% of those polled said cash flow has been impacted by clients failing to pay on time. Half of the respondents revealed they have struggled to pay for materials and 30% have been unable to take on new work as a result of late-paying clients, with a further 8% missing a loan repayment or vehicle lease payment.
In response, many builders have changed the way they take payment. While two thirds still send a final invoice to the customer when the work is completed, 58% take a deposit before starting work and 28% now take card payments in person at the end of each week.
Richard Carter, founder of Lopay, said, “When times are tough, keeping on top of your cash flow is the difference between life and death for small businesses. Nowhere is this truer than in construction, where the epidemic of late payment is pushing many contractors to the edge.”
