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Construction firms see average wait for payment hit 107 days in 2014

Construction and real estate firms had to wait an average of 107 days to receive payment in 2014 – more than in any other industry, according to new research.

Since 2008, the average waiting time for payments to construction and real estate companies has increased by 22 per cent, according to the study by the Asset Based Finance Association (ABFA).

Payment times have grown from an average of 88 days in 2008 to hit nearly 15 weeks in 2014.

This increase is the highest seen in any industry covered by ABFA’s research.

Architecture firms saw payment delays grow by 17 per cent, the second highest after construction, with the average payment time hitting 71 days last year, up from 61 days in 2008.

In contrast, businesses in the hospitality sector - including hotels, restaurants and bars - have some of the shortest waits for payment, at an average of just 20 days, down by a fifth on 2008.

The research suggested that the ability to enforce upfront payment has helped to drive down payment times in some sectors.

In the education sector, payment times halved from an average of 51 days in 2008 to 25 days in 2014.

But SMEs across all industries have found themselves waiting longest for payment.

On average, firms with turnovers of less than £1m are waiting 71 days for payment, while firms with a turnover of between £250m and £500m find themselves waiting only 48 days.

Commenting on the research, ABFA chief executive officer Jeff Longhurst said: “In the construction and real estate sectors, there has been a long history of delays in payment.

“Despite numerous attempts by several governments to improve the situation, these figures show the problem is actually worsening.

“For a lot of construction businesses, the effects of the recession were exacerbated by the difficulties they had in getting paid on time for the contracts they did win.

“Long supply chains in industries like construction mean that the ripple effect of delays is likely to affect many other businesses further down, with SMEs hit the hardest.

“In an industry with high overheads in terms of materials and labour costs, this can be incredibly frustrating and difficult to cope with.”

The data backs up findings from Begbies Traynor’s Red Flag Alert in April, which showed that the number of construction firms experiencing ‘significant’ financial distress rose by 45 per cent in the past year.

Of the firms under significant strain, 97 per cent were SMEs.

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