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Companies going bust put hire firms under the cosh

Almost 80 per cent of equipment leasing firms have lost money because of construction companies going bust.

That figure has come from a survey by business information provider Creditsafe, which also found that 36 per cent of equipment firms had in the last year seen customers try to renegotiate their original contracts.

It said 79 per cent had lost out due to hirers’ insolvencies, while 66 per cent had experienced late and defaulted payments.

Attempts at renegotiation of terms had occurred in all parts of equipment hire, including scaffolding, tools and cranes.

Creditsafe noted that leasing and hire firms’ profits were underpinned by long-term contracts, and that the trend to renegotiate these, “could have a potentially dramatic impact on the financial forecasts by [these] companies”. 

The scale of late or defaulted payments also posed a danger to hire firms’ cash flow, forcing them to draw on capital reserves or use costly borrowing facilities.     

Creditsafe business development director David Knowles said: “The renegotiation of contracts wreaks havoc on financial forecasts and planning. 

“Firms need visibility on revenues and it is simply not possible if customers signed to long-term agreements seek to revise their terms, pay late or in the worst case scenario go bankrupt owning significant sums of money.” 

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