Construction Debt Recovery Issues. An ever-growing problem.
As a recent Construction News analysis reveals its exposition of the payment practices of the UK’s top 100 contractors, we take a closer look at the persistent construction debt recovery issue of late payers in the construction industry.
Cape Industrial Services, Imtech and Spie ranked amongst the slowest payers in the new report, while Clancy, RG Carter and Bechtel topped rankings for fastest payments.
The report also measured the habits of companies paying within their official payment terms, with RG Carter and Bechtel again ranking highest along with Byrne Group. Among the lowest; McNicholas Construction, Lakehouse and Alun Griffiths.
Cabinet Minister Oliver Dowden has publicly stated that he had twice called in strategic suppliers to warn Lakehouse Contracts, who have since gone into administration, over their lengthy payment terms.
Dowden added that the government is increasing pressure on historic late payers, who risk exclusion from bidding on future government contracts.
Indeed, chancellor Phillip Hammond has confirmed that the government will soon introduce compulsory reviews by company audit Committees on payment practices, and incorporate such reports into annual accounts.
This latest announcement comes just weeks after Osborne CEO Andy Steele’s declaration that the industry ‘can’t afford’ to tackle its late payment habits under the current market conditions.
This, Steele adds, is because banks are increasingly restricting their financing to construction companies, while tightening payment records often requires withdrawing a loan to ensure the supply chain is satisfied.
The aforementioned government pressures rising under the current conditions of financial strain have created a ‘perfect storm’ for big contractors, and indeed Steele reminds us that it is in ‘nobody’s benefit’ if these companies, even those with historically poor payment records, were to ‘get into trouble’.
Andy Steele did admit however that there were active measures that companies could and should take to improve their payment performance, including for example the implementation of more efficient internal systems to increase payment transparency.
Regardless, the Osborne chief’s message should be taken as an important reminder of the wider external constraints even the largest of firms face when it comes to their supply chain accountability.
Smaller subcontractors must take heed that government pressure and exposition of records through such reports as the CN Analysis will not necessarily guarantee their secure payment, and should take vital preventative measures to protect themselves against cashflow issues and potentially even bankruptcy.
Credit control is one such imperative measure. While many firms choose to run their own in-house credit control facilities, for those who have neither the time, resources or indeed expertise to do so, Contract Recovery Solutions can help.
Talk to CRS today about our tailor-made construction debt recovery services and how they could protect your firm against the serious dangers of non-payment. Give us a call on 0114 236 1884 or email firstname.lastname@example.org.
CRS provides a FREE initial review of the ledger, detailing the total amount of book debts, work in progress and retentions outstanding from each debtor and a predicted recovery based upon the information provided and the status of the company.