Half of SME construction business owners hit by late payment problems have suffered mental health issues as a result, according to a survey by The Prompt Payment Directory.
Of 400 SME owners surveyed who had been hit by late payments, 48 per cent said they had suffered from increased stress, anxiety, depression and other mental health issues over the past 12 months.
This has increased significantly since 2017, when the proportion of small and medium-sized firms affected was 27 per cent.
Late payments were also hitting personal finances, with 62 per cent of business owners not paying themselves at certain points of the past 12 months, 36 per cent struggling to make mortgage or rental payments, and 25 per cent being forced to sell their houses and downsize or start renting.
Federation of Master Builders chief executive Brian Berry said the findings were “extremely worrying” and that poor payment practices had been “accepted as the norm for too long”.
The survey found that the impact of late payment and poor cashflow on business survival had increased over the year, with 74 per cent of owners saying it had pushed their company to the brink of collapse, or could soon do so if problems persisted – up from 44 per cent last year.
Insolvency firm Begbies Traynor recently revealed that the number of construction firms in financial distress had jumped 26 per cent in the first quarter of 2018 to more than 60,000, compared with just over 48,000 in the first quarter of 2017.
Prompt Payment Directory managing director Hugh Gage said: “Recent high-profile cases such as Carillion have made many more people aware of the cost of late or non-payment and how it can affect smaller construction firms, but in reality this has been going on for years.
“Our latest research reveals that the impact of late payments has got even worse since last year and is having even deeper repercussions on smaller companies nationwide; it’s affecting and even destroying people’s business, health and lives.”
A third of SMEs reported being told that late payment was due to the client themselves awaiting payment, while a quarter had been told the ‘the accounts person is away’ by late payers.
Pressure is growing on the government to act on late payment, with construction trade bodies representing 355,000 firms recently taking a petition to Downing Street calling for reform of payment practices and retentions.
Mr Berry said: “We are calling on the government to introduce a retentions deposit scheme to protect SMEs in the supply chain when things go wrong at the top.
“If the government fails to act, it risks the financial wellbeing of the construction sector, as well as the mental health of those who work in it.”