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Construction sector hit hard by late-payment ‘epidemic’

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The already hard-pressed Scottish construction sector is being strangled by clients routinely failing to pay on time for tens of thousands of pounds worth of work, a new study has found.

The Scottish Building Federation’s latest quarterly monitor said the problem had reached “epidemic proportions” and was constraining the industry’s ability to fight back against the recessionary downturn.

The report found that four out of every five Scottish construction firms were left chasing tardy customers last year, with an average of £90,000 being overdue per company.

The study also found that firms were forced to write off almost £6,000 of work each last year as bad debts.

The industry body’s director Michael Levack said the situation was putting otherwise strong business to the wall.

“Late payment of invoices has long been the bane of many construction firms,” said Mr Levack. “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.”

The SBF monitor also measures confidence in the sector and found firms to be slightly more upbeat about their prospects at the end of the first quarter of the year compared with the previous three months. However, the overall measure remains at -23.

“Confidence within the Scottish construction industry remains weak,” Mr Levack said. “We welcome the Scottish Government’s ongoing ‘root-and-branch’ review of construction procurement.

“I hope this will include practical proposals to address the issue of late payments in the public sector.

“In the private sector we need to see a greater appreciation of the serious problem this has become, as well as tougher sanctions against clients that repeatedly fail to pay their bills on time.”