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Tue June 15 2021

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Construction industry writes off £2bn bad debts a year

26 Jan 15 UK construction firms are writing off an average of £10,000 a year each because customers do not pay, according to a new report.

More than 70% of companies in the construction sector firms suffer from bad debts, the report by Bibby Financial Services (BFS) and management consultant The Vinden Partnership (TVP) says. With 280,000 firms in the sector and 196,000 of them losing £10,000 a year, that is nearly £2bn gone.

Helen Wheeler, managing director of construction finance at BFS, said: “Bad debt is a serious issue for many construction businesses and represents a huge leakage in terms of sector output. Non-payment can occur due to customer insolvency, payment default or dispute and the issue is severely problematic for smaller firms who have often already footed the bill for labour and material costs.

“This places a massive strain on these businesses, often causing viable firms to fold. The problem is particularly acute for those who do not have sufficient working capital or bad debt protection in place to cover against this situation.”

BFS recommends firms buy bad debt protection.

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