More than two-thirds of SMEs not being paid within 30 days, new research shows

The  Federation of Master Builders (FMB) has today revealed how “cowboy clients” are having a damaging impact on small and medium-sized (SME) construction firms.

Results from the FMB’s UK-wide research highlights how a quarter of cnstructuon SMEs have had to wait for more than four months for payment from a client or large contractor and fewer than one third are always paid within the standard 30 days. This delayed or non-payment has resulted in 16% having to borrow money, 8% almost going out of business and 4% needing to let staff go.

Perhaps more worryingly for the industry is the fact 20% of construction SMEs stating consistent late payments have stopped them from having the confidence to grow their business. The FMB have issued the warning saying how late payment by clients is having a “direct impact on the ability of SMEs to grow and prosper”.

Sarah McMonagle, director of External Affairs at the FMB, said: “There are so many horror stories of people being duped by cowboy builders. However, our research shows that there’s a flip side to this story with three quarters of small construction firms being hampered by ‘cowboy clients’. Late payment is having a direct impact on the ability of construction SMEs to grow and prosper. One in five builders say delayed payments from clients have stopped them from having the confidence to grow their business. 

“Worse still, nearly 10% say that they nearly went out of business because of this. As we edge towards Brexit, we need the construction sector to be firing on all cylinders to shore up the wider economy. The last thing we want to see is thousands of builders going to the wall because of their customers refusing to pay on time. We strongly recommend that builders and clients do everything they can to protect themselves by using a written contract that includes an agreed payment schedule.”

Impacts that late payment is having on construction SMEs include:

  • 30% have had to delay payment to suppliers;
  • 20% say late payment stopped them from having the confidence to grow their business;
  • 16% had to borrow additional funds from a bank or other lender;
  • 8% almost went out of business;
  • 5% had to withhold wages and salaries from staff;
  • 4% had to let staff go.
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