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Thu June 30 2022

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Huge rise in late payment problems

10 Mar 16 Late payments in the construction industry rose by 27% in 2015, according to analysis by a trade credit insurance firm.

In total, the construction sector registered for more payment delays than any other UK sector, accounting for 31% of all payment incidents recorded.

These findings come from a wider report covering the payment delays reported by 250,000 UK businesses, which found that late payments hit a two-year high in the fourth quarter of 2015.

The Euler Hermes Quarterly Overdue Payments Report analyses 17 major industry sectors for reported debtor payment incidents, which it receives daily from the 250,000 UK businesses covered by its trade credit insurance. These include any incidents of companies not being paid for goods and services on time, such as late or delayed payments, default, insolvency, country court judgments, or credit insurance claims.

Construction saw a surge in payment delays in the final quarter of 2015, with a 12% rise in incidents compared with the third quarter.

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The research found that the most affected sub-sectors were general contractors, civil engineering providers and installers of wiring and fittings – with the latter suffering disproportionately due to large projects running over budget.

“The growth in December’s output signalled a positive end to the year for UK construction, but some companies in the sector continue to grapple with the issue of low-margin legacy contracts, rising capital pressures and an increasing skills gap – all putting businesses and payment terms under pressure,” said Dirk Kotze, head of risk underwriting at Euler Hermes UK.

He added: “While some UK industry sectors have seen reductions in overdue payment incidents, insolvencies are set to rise 5% this year and average day sales outstanding (DSO) is expected to edge up to 56 days. The start to 2016 has seen increased volatility, so companies need to remain vigilant.”

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