In the latest state of trade survey by the National Specialist Contractors Council, 82% of members said they had to wait up to 60 days for payment, while 14% face payment periods of 60 days or more.
The survey found that specialist contractors continue to face difficult trading. The results for the fourth quarter of 2010 show that the market remains unstable and, with only 29% of respondents reporting an increase in enquiries and 33% an increase in orders, there is unlikely to be any sustained growth in the short term.
The longer term outlook is more positive as almost half of specialist contractors expect an increased workload over the next 12 months compared to 36% last quarter. A member of the British Drilling Association (BDA) suggested that this was because “contracts held back pending the outcome of the spending review [would now be] released”.
Some 74% of respondents to the survey reported increased supplier prices with high inflation impacting on the cost of raw materials, particularly steel. The increase in the rate of VAT, clients delaying orders and the difficulties in raising finance also affected specialist contractors in the last quarter. Lower profit margins are therefore expected by 59% over the next quarter despite a slight improvement in tender prices.
Retentions remain a major bugbear with 86% of respondents having money withheld against them in retentions and 34% of retention monies are overdue for release. On average, 9% of outstanding retentions are written off as bad debts. Nearly one in five (18%) companies has used a retention bond as an alternative to cash retention.
NSCC chief executive Suzannah Nichol said: “It is disappointing to see that only 4% of specialist contractors are being paid within 30 days in these straitened times. Prompt payment is crucial to delivering best value, and this has clearly been recognised by government as the biggest construction client, which has made 30-day payment periods mandatory on its projects.”
A full copy of the latest NSCC State of Trade report is available by clicking here
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