Late payments crippling for the construction sector

Many businesses in the construction sector are facing increased pressure from long delays to their payments, according to research published in November 2017 by business finance aggregator Funding Options.

The research has looked at 13,213 UK construction firms and has found that they have faced an average wait of 69 days for their invoices to be paid over the past year, marking an eight per cent rise from the 64 days wait recorded in 2014/15.

One single late payment can cause difficulties for successful firms, especially if a major client delays a payment significantly and the delay coincides with a major bill coming in, such as a tax or rent payment. Then the knock-on effect can be even more severe.

The average daily wait for invoice payment has steadily risen from 52 days in 2011/12 to 69 days in 2015/16. The slow payment of bills was recorded as a key reason why the construction sector has a high number of insolvencies, with 2,557 entering insolvency in the year ending 2016.

The construction sector also has a long supply chain which includes many small and medium sized firms, so the delays in payment typically have a domino effect and in extreme cases, may put jobs at risk.

David Brown, partner at Gullands Solicitors comments: “With housebuilding being a main priority for the Government in the November budget, it would also be good to see them and the banks offering support to businesses in the sector, who are having to deal with the increase in the wait for payment. There are mechanisms in law available to help to deal with this, but many businesses don’t take legal advice at the correct point in the process. It is important to make sure your contract adequately covers payment terms in the first instance and then you need to proactively approach recovering payments.”

David Brown has specialisation in assisting both contractors and sub-contractors with payment disputes and difficulties, using negotiation, adjudication and if necessary court action. It is necessary for contractors and sub-contractors to act quickly on payment notices and to use the terms of their contract and the Construction Act and Scheme for Construction Contracts and the Adjudication regime to their advantage, as the current legislation is designed to resolve payment disputes quickly.

David Brown can be contacted at d.brown@gullands.com