Businesses in the construction sector are facing increased pressure from delays to their payments, according to new research from Funding Options.
An analysis of 13,213 UK construction firms found that they 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.
The analysis flagged that a single late payment can prove a headache even for successful firms, if a major client delays a payment significantly. If the delay coincides with a major bill coming in, such as a tax or rent payment, the knock-on effect can be even more severe.
Slow payment of bills was recorded as a key reason why the construction firm has a high number of insolvencies, with 2,557 entering insolvency in the year ending 2016.
Funding Options noted that the construction sector also has a long supply chain which includes many small and medium sized firms, so the delays in payment can also have a domino effect here too, and in extreme cases, put jobs at risk.
Conrad Ford, chief executive of Funding Options, said:
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.
He added: “There is a wide range of choices out there for small businesses seeking funding - invoice finance, asset finance, crowdfunding and peer-to-peer lending can all provide the liquidity businesses need. Unfortunately, small businesses leaders often don’t know which sort of finance is the best fit for a particular need, or who is out there to provide it.”
IHS Markit found a slight boost to the construction sector last month, saying that housebuilding was "the sole bright spot in an otherwise difficult month".
IHS Markit's purchasing managers' index for the construction industry rose to 50.8 in October, up from 48.1 in September and ahead of expectations of 48.0. Any figure below 50 denotes a contraction in the sector.