Late payments restrict construction

Report shows government measures are failing to help

Late payment to construction firms is the top issue stifling the industry’s growth, according to a new report by independent funder, Bibby Financial Services (BFS).

The Planning for Growth report – produced in conjunction with construction specialists The Vinden Partnership (TVP) – saw 53 per cent of SMEs citing the issue as a key challenge. It also reveals a lack of skilled workers and red tape as the main issues currently threatening businesses in the UK.

Helen Wheeler, Managing Director of Construction Finance at BFS, says the issue of late payment threatens the survival of many viable companies in the UK. Helen said: “Issues associated with late payment continue to hinder the growth of thousands of small construction businesses every year, despite government efforts to improve the situation. This has a huge impact throughout the entire supply-chain and will undoubtedly affect the performance of the construction sector this year.

“Our research shows that firms are facing other significant issues such as increasing red-tape and skills shortages, so there are substantial barriers for subcontractors and small construction firms to overcome in 2015.”

According to the report, government measures established – including the Prompt Payment Code introduced in 2008 and the Construction Supply Chain Payment Charter announced last April - have not yet eased the woes of many small businesses.

Mal Bannatyne of Bannatyne Construction in North London said: “Late payment is a big issue in the construction industry and too often, payment delayed by weeks, which can be extremely problematic. The Prompt Payment Code hasn’t helped as most businesses don’t take much notice of it.”

Almost half of construction firms (47 per cent) see a shortage of skilled workers as one of the biggest threats to their business, with many (39 per cent) citing increasing levels of red tape as a serious concern.

Managing Director of TVP, Peter Vinden said: “Compliance with health and safety legislation is a serious consideration for smaller construction firms. Many of them don’t have either the time or financial stability to keep up-to-date with the increasing paperwork required.”

Helen Wheeler concluded: “There are opportunities available in the construction sector but many firms are unable to take on work due to a lack of working capital. Late payment causes significant cashflow issues and exposes businesses to risks brought about by the inability to pay suppliers and workers.”

Findings follow news that activity in the UK construction sector rebounded in January, though remained weaker than the peaks of last summer, according to the Markit/CIPS construction Purchasing Managers’ Index.

The Planning for Growth report can be downloaded at: http://www.bibbyfinancialservicesblog.com/planning-for-growth.

Posted by on 23 February 2015.