Late payment by developers is “crippling” small subcontractors, claims business finance firm

Small construction firms are struggling to manage their cash flow because the big property developers are dragging their feet when it comes to paying them, according to research by Funding Options.

The company, which describes itself as an online alternative business finance matchmaker, claims that on average it takes the UK’s top 10 biggest developers 61 days to pay their subcontractors – despite the fact that their own invoices are, on average, paid in around half that time (35 days).

Furthermore, it says the findings of its survey reveal the gap in payment is widening, with figures for 2014 showing that developers received payment within an average of 41 days, while they took an average of 50 days to pay their subcontractors.

The impact of late payments can have a “crippling” effect on small subcontractors such as plumbers, electricians and carpenters, who can be left with cash-flow problems and inability to forecast effectively.

“Increasing numbers of small construction firms are contacting us for a solution to plug the holes in their balance sheets, caused by developers’ late payments,” said Conrad Ford, Funding Options’ chief executive.

“It is clear that developers are failing to pay their sub-contractors within a reasonable period of time, safe in the knowledge that sub-contractors would be reluctant to voice their concerns for fear of losing out on future business. They hide behind the fact that they ‘agree’ payment terms with sub-contractors, when the only alternative to accepting slow payment is simply losing the work.

“Sub-contractors are increasingly frustrated by late payments by developers largely due to the fact that they are unable to invest in their own growth as a result.”

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