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New research by payment software firm Tungsten reveals an alarming continuation of the late payment problem for construction SMEs, with almost a quarter of the companies they surveyed saying that late payments had endangered their business.

The findings come as government data shows that 2,250 construction firms went into liquidation in 2015, which is more than any other sector. Elsewhere in Tungsten’s research, the news was similarly gloomy:

  • 42% of firms thought that their late payment situation hadn’t improved over the past year
  • Almost a third thought it had become worse

However, just over a quarter of the SMEs said late payments had become less of a problem for their business in the past 12 months.

Only 22% of respondents to Tungsten’s survey had heard of the Prompt Payment Code, a voluntary scheme launched by the government to combat late payment which more than 1,800 businesses have signed up to.

Richard Hurwitz, CEO at Tungsten, said: “While all small businesses experience lean months, construction firms are especially vulnerable to cash flow problems as the industry often sees sudden spikes in demand, with more projects during the summer months.

“This seasonality can leave businesses scrambling for cash to pay for additional manpower and materials, which creates instability and makes it difficult to prosper. This could worsen if companies are forced to turn away work because of a cash shortage.

“It’s worrying that so many businesses still feel under immense pressure despite legislation being put into practice. In hard times, they need more guidance and funding options if they are going to thrive.”

 

Late Payment SMEs

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