Late payment turns construction subcontractors into unwilling creditors
Photo Credit: Sjoerd Lammers street photography via Compfight cc

Late payment is causing mid-sized construction subcontractors to become net lenders, according to figures from the Federation of Master Builders.

Nearly £440 million in money owed to members of the FMB and National Specialist Contractors Council is turning many of these companies into unwilling creditors.

What’s worse, they are effectively bankrolling the biggest firms in the sector, whose unfavourable payment terms are putting the pinch on Tier 2 subcontractors’ cash flow.

More than 700 firms responded to the FMB’s ‘Credit where credit isn’t due’ survey, representing annual turnover of £2.3 billion.

Over 90% said they agree payment terms of 45 days or less; yet just 57% actually get paid within the agreed period of time.

FMB chief executive Brian Berry said: “Although contractual payment terms are improving, late payment is still rife within the supply chain, and much more needs to be done to ensure payments are made within terms.”

Worryingly, the survey found that 89% of respondents agree to payment terms of 45 days or less on their own contracts, and 84% claim to pay before the due date – evidence that on late payment, the buck stops with the Tier 1 brands.

Mr Berry added: “The Government’s Fair Payment Charter has so far had a limited impact and we need to work together to ensure wider awareness and sign-up, with the aim of ending this culture of late payment once and for all.

“It is holding back our industry in all sorts of ways, not least by damaging the image of the construction sector and deterring some people from wanting to work in our industry.”

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