Construction payment times ‘getting later’

More than half of all invoices sent to construction firms were paid late last year, an 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 others – water and waste (58 per cent) and mining and quarrying (53.2 per cent) – performed worse.

But construction’s year-on-year change was the worst of any of the sectors.

The company analysed more than 100 million invoices from accounts receivable departments across the two years to reveal the results.

Federation of Master Builders (FMB) chief executive Brian Berry said late payments were “a real issue for small, local builders who are cashflow-reliant”.

“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.

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.

Construction News reported earlier this month that 23 firms fell into administration in December – fewer than in November but more than the monthly numbers for August, September and October last year. The majority were SMEs.

Last year the sector also lost its red diesel tax breaks, which CN reported would further squeeze firms struggling to make ends meet.