New report finds industry is worst-hit by lack of timely settlements
The construction industry is the British business sector hardest hit by late payments, and almost one third of firms say the issue has nearly killed their operations according to a new report.
Credit-referencing agency Graydon UK said its research showed that some 53% of firms in the construction industry saw late payments as a significant problem, compared with around 20% of retailers, distributors and restaurant owners.
The report (see file) was compiled in partnership with the Forum of Private Business and was based on a survey of 500 small companies.
It also found that 31% of construction companies said they had almost gone out of business as a result of late payments, compared with 19% of manufacturers, 17% of business-services operations and 5% of retailers.
Forty-six percent of construction firms said their profit margins were damaged by late payments, while 35% said the practice also hampered their ability to innovate.
Speaking at a House of Commons summit where the report was launched, Graydon spokesman Gordon Skaljak said the current economic climate makes it more important than ever that companies clearly understand the risks and opportunities associated with their operations.
“Companies cannot achieve sustainable growth if they aren’t paid on time consistently,” he said.
“The business community and the Government must join forces to protect companies by stamping out the UK’s late payment culture.”
Phil Orford, chief executive of the Forum of Private Business, said the research showed how damaging the late payment of invoices was for small firms across every sector.
“It decimates cash flow, kills growth and innovation and ultimately forces businesses to the wall,” he said.
“We need to do two important things - first, communicate to business owners exactly what they can do proactively to minimise late payment, including putting in place robust cash flow management procedures and even simply invoicing properly and on time, then we need to provide the support and services they need to make tackling late payment a standardised business process.
“Second, we need to persuade large corporations to embrace paying their suppliers on time and in full, avoiding the temptation to impose damaging, retrospective changes to terms and conditions, so that prompt, proper payment washes down the supply chain.”