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Wed May 18 2022

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Specialists warn that construction’s cashflow crisis is unsustainable

30 Aug 17 The Specialist Engineering Contractors’ Group (SEC), which represents subcontractors in the construction engineering sector, has warned that current cashflow problems in the industry are unsustainable.

SEC Group chief executive Rudi Klein
SEC Group chief executive Rudi Klein

Small and medium sized (SME) businesses in the construction industry are increasingly dependent on their directors for funding because of the prevalence of payment delays and lack of access to reasonably priced lines of credit.

SEC quotes recent research by Funding Options that found that directors lent their construction businesses £38m in 2015/16, up from £29.7m two years before. The businesses included in the research include specialist trades such as electricians, plumbers, plasterers, carpenters, decorators, scaffolders and roofing companies

SEC Group chief executive Rudi Klein said: “With SMEs now relying more and more on their directors for their liquidity the cashflow position in the industry is now critical.”

He said that many of Britain’s biggest construction contractors had financial problems. “These companies are taking longer and longer to pay their supply chains with SMEs having to spend the bulk of their contract values up front before receiving any payment,” he added.

SEC Group is lobbying the government to introduce legislation to mandate the use of project bank accounts across the whole of public sector construction. It also wants cash retentions to be ring-fenced and mandatory 30-day payments.

SEC Group represents an alliance of the British Constructional Steelwork Association, Building Engineering Services Association, Electrical Contractors’ Association, Lift & Escalator Industry Association, SELECT (Electrical Contractors Association of Scotland) and Scottish and Northern Ireland Plumbing Employers’ Federation (SNIPEF).

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