UK contractors report increase in late payments

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UK contractors person reported an summation successful dilatory payments since the commencement of the COVID-19 pandemic.

More than two-thirds (65%) of contractors person experienced slower payments since the commencement of the pandemic, according to probe carried retired by Lloyds Bank Commercial Banking.

A 4th of businesses (26%) accidental it present takes their customers much than 30 days to settee outstanding invoices, with debtors astir commonly citing cashflow pressures (33%) and precocious payments from their ain customers (28%) arsenic their reasons for paying late.

Meanwhile, astir one-third (29%) of firms accidental it presently takes them much than 30 days connected mean to wage their ain suppliers, with precocious payments from customers (24%) and cashflow pressures (21%) being their astir communal reasons for not settling invoices connected time.

Lloyds Bank caput of operation Max Jones said: “Slow and precocious payments tin necktie up captious funds for acold longer than optimal, making it harder for operation businesses to instrumentality connected caller projects oregon respond rapidly to immoderate abrupt downturns successful trading.

“UK operation assemblage output is growing, but galore firms’ moving superior is being strained by factors specified arsenic heightened worldly and vigor costs. In this situation it volition beryllium captious that absorption teams bash everything they tin to trim the hazard of precocious payments and mitigate immoderate interaction connected cashflow.

“Practical measures, specified arsenic improving forecasting processes oregon offering discounts for aboriginal payment, could beryllium invaluable options. Specialist moving superior absorption tools similar invoice concern volition besides beryllium a almighty instrumentality successful firms’ arsenals – helping to rapidly merchandise wealth that would different stay tied up successful unpaid invoices.”

A Construction News survey published successful February shows that, heading into 2022, many firms successful operation person either completed oregon begun a process of modernising their outgo processes in a bid to trim the clip it takes to wage invoices. Most expect a scope of benefits, from either broadside of the transaction, but galore consciousness taste challenges stay a greater problem.

In March 2019, when CN archetypal analysed the outgo times of the UK’s 100 biggest contractors, the mean clip it was taking to settee an invoice was 43 days. The percent of invoices not paid to presumption crossed our apical 100 averaged 28 per cent. Our latest analysis, published astatine the extremity of 2021, recovered the mean hold has shortened to 39.5 days, with 12 per cent of invoices not paid to terms.

Larger firms are mostly quicker payers than smaller firms, with those boasting a turnover of £1bn oregon much – the apical 15 biggest contractors – averaging outgo times of 32.7 days. This compares with 43.8 days for firms with a turnover of nether £200m (position 70 and beneath connected the table).

The Prompt Payment Code was introduced successful an effort to amended outgo times. The code, successful cognition since 2008, is simply a voluntary inaugural whereby companies perpetrate to paying their suppliers wrong an agreed timeframe. In 2019, the assemblage that was past administrating the strategy – the Chartered Institute of Credit Management – began publically naming firms that did not conscionable its terms, which astatine the clip was to wage 95 per cent of invoices wrong 60 days.

The UK’s biggest contractor, Balfour Beatty, was booted disconnected the inaugural successful 2019 and reinstated successful aboriginal 2020. As astatine mid-2021, it was taking 38 days connected mean to wage – a flimsy betterment connected its erstwhile show of 40 days, recorded six months earlier. Some 58 per cent of invoices were paid wrong 30 days successful the six months to the extremity of June 2021. The steadfast besides improved connected the proportionality of invoices paid to terms.