Four out of five Scottish construction firms have had problems with late payment of invoices over the past year, with the average building company reporting almost £90,000 owed from overdue invoices.
The majority of contractors have had to write off unpaid invoices over the past year, with the average value of invoices written off at almost £6,000.
These are some of the key findings of the latest Scottish Construction Monitor, a regular survey of Scottish construction bosses conducted by the Scottish Building Federation (SBF).
The SBF represents 600 firms from sole traders to major contractors. Members were also asked how confident they were about their prospects over the next 12 months compared to the past year. The latest survey indicates industry confidence has risen by five points compared to the previous quarter but remains pretty feeble at minus 23.
Only 21.3% of respondents said they were more confident about the next 12 months; 46.3 said they were less confident.
The SBF warns that many firms are having their cash-flow undermined by late payments, raising the threat of potential business failure. The findings are published as the latest official statistics show 164 Scottish building firms were forced into bankruptcy last year, a rise of 122% on the number of construction companies going bust back in 2008.
SBF executive director Michael Levack said: “Late payment of invoices has long been the bane of many construction firms. But in the current economic climate, it risks becoming the difference between continued trading and business failure. For Scotland’s construction industry, this survey demonstrates that late payments have become an issue of epidemic proportions, affecting an overwhelming majority of businesses, irrespective of their size.
“What is more, a majority of construction firms have been forced to write off outstanding payments worth thousands because of persistent non-payment. It is a tragedy that otherwise excellent businesses are forced into bankruptcy because of a lack of the cash-flow they need to pay bills and salaries when customers fail to pay their bills on time – or at all. “
He concluded: “Confidence within the Scottish construction industry remains weak and the issue of late payments is certainly contributing to that overall lack of industry confidence. We welcome the Scottish Government’s ongoing ‘root and branch’ review of construction procurement. I hope this will include practical proposals to address the issue of late payments in the public sector. In the private sector, we need to see a greater appreciation of the serious problem this has become as well as tougher sanctions against clients that repeatedly fail to pay their bills on time.”
Q4 2009 – Q1 2013: Scottish Construction Confidence Rating
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