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Subbies waiting 60 days for payment

More than four in five specialist contractors have to wait up to 60 days to receive payment for work, according to research.

A survey carried out by the National Specialist Contractors’ Council in Q4 2010 showed that 82 per cent of respondents were waiting up to 60 days - and just 4 per cent received payment within 30 days.

NSCC chief executive Suzannah Nichol said it was disappointing to see the results, particularly in difficult economic times.

“Prompt payment is crucial to delivering best value, and this has clearly been recognised by the government, as the biggest construction client, which has made 30-day payment periods mandatory on its projects,” she said.

The survey also found that 86 per cent of respondents had money withheld against them in retentions, at an average of £202,551, with £69,609 overdue for release.

This equates to 34 per cent of retention money being overdue for release, up from 31 per cent in the previous quarter. On average, 9 per cent of outstanding retentions are written off as bad debts while 18 per cent of companies have used a retention bond as an alternative to cash retention.

Among comments made to the NSCC were that clients were facing problems raising finance and that the recent VAT increase made VAT-registered companies prohibitively expensive compared with non-registered sole traders.

Despite this, the survey showed a more positive long-term outlook for contractors.

While the council warned there was unlikely to be sustained growth in the short term, results showed that almost half the specialist contractors surveyed were anticipating an increased workload over the next 12 months, compared with 36 per cent in Q3.

Seven in 10 respondents expected their businesses to remain the same size for at least the next quarter, while the percentage planning expansion next quarter rose marginally from 16 to 17 per cent.

The survey also showed that 38 per cent were planning to expand within the next 12 months, reflecting what the NSCC described as a more positive medium-term outlook.

Similarly, the number of respondents planning to downsize their businesses in the first quarter of 2011 fell to 12 per cent against 23 per cent a year earlier.

The cost of materials, particularly steel, was raised as having a major impact on specialist contractors’ businesses, and 74 per cent of respondents reported increased supplier prices compared with 67 per cent the previous quarter.

Among the other findings in the report were that 29 per cent reported an increase in enquiries for Q4 while 33 per cent reported an increase in orders.

However, 31 per cent reported a decrease in enquiries and 36 per cent a decrease in orders.

 

Readers' comments (1)

  • 2 old chestnuts but very relevant. As a specialist sub-contractor we are just so tired of filling in all the pre-order forms and questionnaires, only to do excellent work and then get messed about being paid monthly valuations so we're always financing the project. Then retentions...well how depressing that in these days of technology & spreadsheets no-one seems capable of working out which sub-contractors have provided excellent service and should be paid in full. We have installations where the actual product warranty has run its course whilst we're still waiting for the 2nd half of our retention because of someone else's shoddy work. This isn't right and costs us an absolute fortune. We should be able to report projects that aren't signed off as complete more than 1 year after end user occupation and get monies released. What an archaic system people cling to in this country...

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