Clients that delay or withhold payment without good reason or make completely unreasonable demands are a serious problem for three out of four small and medium-sized (SME) construction firms, research by the FMB has found.
Nearly a quarter have had to wait for more than four months for payment from a client or large contractor.
Less than one third are always paid within the standard 30 days.
This ‘cowboy’ behaviour by clients is having a significant impact, it appears, with 30% of the SME building firms having to delay payment to their own suppliers, while 20% say late payment stopped them from having the confidence to grow their business.
8% said that they have almost gone out of business as a result and 5% have had to withhold wages and salaries from staff.
FMB director of external affairs Sarah McMonagle said: “There are so many horror stories of people being duped by cowboy builders. However, our research shows that there’s a flip side to this story with three quarters of small construction firms being hampered by cowboy clients. Typical cowboy client behaviour can include a demand for the builder to complete tasks not included in the original brief or quote and for no extra payment. The worst type of cowboy client seeks to delay or withhold payment on spurious grounds, for instance by discovering make-believe faults. Nearly a quarter of construction SMEs have had to wait for more than four months for payment from a client or large contractor. Fewer than one third of builders are always paid within the standard period of 30 days and this is completely unacceptable.”
She concluded: “Late payment is having a direct impact on the ability of construction SMEs to grow and prosper. One in five builders say delayed payments from clients have stopped them from having the confidence to grow their business. Worse still, nearly 10% say that they nearly went out of business because of this. As we edge towards Brexit, we need the construction sector to be firing on all cylinders to shore up the wider economy. The last thing we want to see is thousands of builders going to the wall because of their customers refusing to pay on time. We strongly recommend that builders and clients do everything they can to protect themselves by using a written contract that includes an agreed payment schedule. Clients rightly demand a high level of service from their builder but home owners also need to keep their end of the bargain by paying on time.”