More than a third of main contractors, subcontractors, clients and consultants are paid more than 60 days after issuing invoices, according to a survey shared exclusively with Construction News.
The research by software provider Textura Europe asked construction firms how long they typically took to pay suppliers and how long they waited to receive payment themselves.
Source: Textura Europe
More than a third – 35.8 per cent – of respondents said their average wait for payment was more than 60 days after an invoice was raised.
Among main contractors, 34.2 per cent said they waited more than 60 days, with 15.8 per cent waiting in excess of 75 days.
For subcontractors, over a quarter (26.9 per cent) said it took on average more than 60 days to be paid, while around the same proportion took 60 days to make payments themselves.
Even more main contractors (36.8 per cent) took in excess of 60 days to make payments, with 18.4 per cent admitting to paying more than 75 days after receiving invoices.
Across all 109 respondents, 11.9 per cent claimed that payment usually took more than 75 days to be received, with half of that group saying they waited longer than three months, on average.
The survey suggested SMEs were continuing to experience difficulties resulting from late payment, with one firm stating it would consider offering a 75 per cent discount in return for receiving payment within 30 days.
One subcontractor claimed: “Almost all main contractors pay late without justification and poor payment practices are getting worse not better.
“No one seems to be willing to tackle [the problem] and they get away with what amounts to fraud day in, day out. Then they have the nerve to ask us to sign non-corruption forms.”
Late payment has been cited as a factor affecting a number of companies that have fallen into administration in recent months.
In the first half of 2015, 133 construction firms went into administration, according to Deloitte.
A chief executive at one specialist contractor told Construction News: “Large contractors are undercapitalised and the result is they’re trying to make money using supply chain finance.”
A supply chain director at a major contractor said more could be done by all sides to remedy the problem.
Source: Textura Europe
He told Construction News: “The amendments to the law to counteract late payments are not used very much. Suppliers choose not to use the tools available to them. But the question is: are those tools fit for purpose?”
The majority of respondents (69.7 per cent) were in favour of the Prompt Payment Code, with one distributor saying it should be mandatory.
The PPC is a voluntary initiative administered by the Chartered Institute of Credit Management that ensures signatories pay suppliers on time, give clear guidance to them and encourage good practice throughout the supply chain.
The supply chain director, however, argued that the PPC did not look at the big picture.
“The PPC is about having contractual teeth but the problem is, it doesn’t have any. The issue being avoided is that there are no ramifications for late payment.
“It isn’t going to stop subcontractors in financial difficulty paying their suppliers late. But what I think isn’t in line with what the government wants me to think.”
One transport infrastructure finance adviser also questioned the effectiveness of the code, asking: “Who will ever enforce [the code] as this has not happened in 50 years?”
A number of respondents agreed, acknowledging that while the PPC made it clear how payments should be made, its voluntary nature undermined its effectiveness.
One subcontractor said the code needed “better policing” on public sector contracts.
“The government should audit how fast their contractors are paying their suppliers rather than just take their word for it,” they stated. “Subcontractors shouldn’t be forced to pay a premium.”
Last year, the Construction Leadership Council industrial strategy established a charter demanding payment terms of 30 days, but this has yet to be supported by legislation.