Study shows small firms have up to 16% of their turnover outstanding in unpaid bills
Small construction firms were owed an average of £484,000 by their trade debtors last year, research has found.
The study of 550 company accounts for the 2013-14 financial year by debt recovery legal specialists Debt Guard Solicitors found the average SME construction firm was owed £484,000 by trade debtors.
Trade debt represents money owed to a business - including current invoices and overdue payments - for goods and services supplied to customers over the course of its financial year.
The survey found smaller companies of between ten and 49 staff were worst hit and were owed an average of £627,000 by trade debtors, which equated to 16% of their turnover on average.
Medium-sized firms of between 50 and 249 employees were only slightly better off with average outstanding trade debts of £969,000, which equated to just 13% of their turnover on average.
Firms with 1-9 employees and a turnover less than £2m each had an average trade debt of £41,000, accounting for 14% of turnover.
Mark Burgess, chief operating officer at Debt Guard Solicitors, said: “This research highlights the financial headache caused by outstanding and unpaid bills in the construction sector.
“It is clear that smaller SMEs in particular need much greater support in this respect, as many are facing the very real threat of closure due to trade debt pressure.”
The news follows the industry’s attempts to tackle to problem of late payments over the last year.
The most recent initiative has been the launch of the government-backed Construction Industry Payment Charter, which so far has the support of several big clients and other firms that are part of the Construction Leadership Council.