Late payments put Scots building businesses at risk

HUNDREDS of Scottish construction firms are being put at risk by the “epidemic” of late invoice payments, a report published today suggests.

In the last year, four out of five businesses have had problems with late payments. The average amount a company is owed is £90,000, according to the Scottish Building Federation (SBF).

Figures show that 164 Scottish building firms went bankrupt last year and the SBF said the industry’s cash-flow is being “critically undermined” by late payments.

It is the latest alarm bell to be sounded for the sector, which has endured a torrid few years as the economy cools and house-buying and building activity slows sharply.

Earlier this month it emerged that construction output had tumbled in the opening weeks of the year.

Official figures showed that output across the UK fell by 7.9 per cent year-on-year in January. Compared with the month before, output was down by 6.3 per cent, according to the Office for National Statistics.

A breakout analysis provided by the SBF revealed a 10 per cent decline in output north of the Border last year. It calculated the impact to the economy at £1.1 billion.

Michael Levack, executive director of the SBF, which represents about 600 companies, said: “Late payment of invoices has long been the bane of many construction firms.

“But in the current economic climate, it risks becoming the difference between continued trading and business failure.

“For Scotland’s construction industry, this survey demonstrates that late payments have become an issue of epidemic proportions, affecting an overwhelming majority of businesses, irrespective of their size.

“What is more, a majority of construction firms have been forced to write off outstanding payments worth thousands because of persistent non-payment.

“It is a tragedy that otherwise excellent businesses are forced into bankruptcy because of a lack of the cash-flow they need to pay bills and salaries when customers fail to pay their bills on time – or at all.”

Despite the late payment issue, confidence has grown within the industry, according to the SBF construction monitor, a survey which asks building bosses how confident they are about their future prospects.

The latest results show confidence has risen by five points but remains low overall at minus 23.