Construction companies hit hardest by growing waits for payment

Businesses in the construction sector have been hit hardest of any UK sector by longer waits for their invoices to be paid, with delays increasing 22% in the last year from 67 days to 82 days (or nearly 12 weeks) said the Asset Based Finance Association, the body representing the asset based finance industry in the UK and the Republic of Ireland.

The ABFA says UK businesses now face an average wait of 61 days – just a 2% increase from 60 days last year.

But it points out that the construction sector has a particularly long supply chain which includes many small and medium enterprises. It explains that delays in paying contractors will put jobs at risk all along the supply chain.

The ABFA says that slow payment of bills is a major reason why the construction sector has such a high number of insolvencies. Last year 17% of all corporate insolvencies were businesses in the construction sector.

The ABFA notes that the construction sector was already experiencing a slowdown driven by uncertainty in the run up to the Brexit vote.

Jeff Longhurst, chief executive of the ABFA said:

“The construction sector has a real problem getting clients to pay early on.

“The huge number of construction companies that became insolvent last year only goes to show how bad the problem is.

“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 difficult to deal with.

“This will only add to the woes of the construction sector, which has been among the hardest hit by the uncertainty surrounding Brexit.

“Use of invoice finance can offer a solution for businesses dealing with long waits for payment. Invoice finance allows businesses to receive payment up front for their unpaid invoices, making sure that they are insulated from the risks of slow payment by customers, and letting them invest in their growth. Many ABFA members have set up specialist Construction Industry teams to work closely with businesses and address the working capital issues caused by these extended payment days.

“These figures show that it’s more important than ever that the construction sector fully understand the options available to them to free up the funds they require and to minimise the impact of late payment and other poor payment practices.”