Latest research reveals that the number of small construction firms struggling financially has risen dramatically since last year.
The findings come amidst fears over the knock-on effect to the supply chain following the Carillion collapse earlier this year.
74% of the construction companies polled – 30% more than last year – have been on the brink of bankruptcy or liquidation, or could be soon due to late payments.
48% – also nearly a quarter more than last year – blame poor cashflow for their panic attacks, anxiety and depression, with some even having suicidal feelings and almost a quarter (22%) experiencing emotions of ‘severe anger’.
62% of owners said late payment issues had also meant that they had not paid themselves for some time, 35% had stopped or delayed bonuses, 15% had had to pay staff late and 17% had reduced their own salary.
If customers continue to pay late, 30% of construction company owners said it will soon affect the progress and growth of their business, while 30% said it had already impacted staff morale, recruitment and retention, 38% had struggled to pay business rates and a quarter had struggled to pay mortgage or rental payments on their office.
The research commissioned by The Prompt Payment Directory (PPD), a payment rating website for businesses, comes despite the Government’s Prompt Payment Code (PPC) and last April’s enforcement of the Government’s new ‘Duty to Report’ scheme that requires large companies to report on payment practices twice a year. It also follows official figures confirming that the number of British businesses going bankrupt reached a four-year high for 2017, with one in every 213 companies falling into liquidation – the highest since 2013.
The survey polled 400 owners, MDs and CEOs of small construction businesses who suffer from poor cashflow due to late or outstanding invoice payments. Ahead of Mental Health Awareness Week (14-20 May), the research examined the personal, financial and business impact of late payments on owners and found the issue had worsened since PPD’s first study was launched last spring.
Hugh Gage, Managing Director of The Prompt Payment Directory, commented: “Recent high profile cases such as Carillion have made many more people aware of the cost of late or non-payment and how it can affect smaller construction firms, but in reality this has been going on for years.
“Construction business owners need to arm themselves against some of the most common late payment issues and fight back against these poor practices as it’s always best to try and avoid them from the outset by using due diligence through credit reference agencies, or services such as The Prompt Payment Directory which rates businesses’ payment behaviour by those that it affects – their suppliers.”