The survey, published in a Menzies report, Fixing the Foundations, found that 86% of firms in Britain’s construction sector are already in, or at risk of serious financial distress, with the average firm expecting to reach this point within just eight months.
Late payments are now almost universal across the sector, with nine in ten (93%) firms reporting delays from clients, contractors or supply chain partners running an average of 53 days overdue. The knock-on effect goes beyond cashflow. One in five (20%) firms are now financing their own projects while they wait to be paid, effectively bankrolling clients out of their own working capital, and 18% say late payments represent one of the single biggest threats to their business.
Freddy Khalastchi, Partner at Menzies LLP said: “Too many construction businesses are still trading, still winning work, but heading in the wrong direction without realising it. A full order book can mask a lot of problems, and in construction the gap between looking busy and being profitable can widen faster than most owners appreciate.
“Most firms usually come to us for advice because something has forced their hand, but by that point, the routes available for recovery are far narrower than they would have been six months earlier. The firms that manage to work through their financial issues are not always the biggest or most resourced. They are the ones that recognised the warning signs earliest. Our advice is simple: take expert advice at the first sign of pressure and make sure that in doing so, you have all the financial information relating to your business at your fingertips. You cannot dictate when a client pays or how geopolitics disrupts your supply chain. But you can control how prepared you are for when they do.”
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