Subcontractors write-off £2.8bn in bad debts every year

Grant Prior 5 months ago
Share

Subcontractors are writing-off a staggering £2.8bn in bad debts every year as non-payment continues to blight construction.

The figure is contained in a study by Bibby Financial Services specialist and consultant The Vinden Partnership .

The Subcontracting Growth 2018 research, undertaken in the aftermath of the collapse of Carillion, reveal that 60% of subcontractors have suffered from bad debt in the last 12 months, with the average firm writing-off £16,149 each year.


Bibby Specialist Finance Director Kash Ahmad said: “Bad debt is a serious issue for many construction businesses and, across the entire sector, more than £2.8bn is written-off each year, representing a significant economic leakage.

“Bad debt occurs due to insolvency in the supply chain, protracted default or dispute and the issue is particularly challenging for smaller firms that have already footed the bill for raw material and labour costs.

“This places a massive strain on these businesses, sometimes even causing viable firms to fold. For many, bad debt is the hidden cost of doing business.”

Almost a fifth of subcontractors (17%) said the most common reason for not receiving the full amount billed was due to a customer going out of business.

A change in the scope of work part way through a project (8%), queries over the quality of work (6%) and disputes over contracts (6%) were also among the top reasons firms would lose money.

Ahmad added: “The Carillion situation has highlighted three fundamental issues in the sector: endemic late payment, bad debt and complexity of contracts. Each of these issues needs to be tackled by both the public and private sectors.”

Helen Wheeler Managing Director for Construction Finance at Bibby said: “Making full and correct payment in accordance with contracts is a fundamental pillar of the Government’s Construction Supply Chain Payment Charter, but it is clear that this simply isn’t happening.

“Unless something more tangible is done, the growth of tens of thousands of small construction firms will continued to be stifled.”

Latest news

Forrest facing D-Day over company’s future

Decision on refinancing plan expected this week
5 hours ago

Multiplex hires Laing O’Rourke commercial leader

Andy Butler joins Multiplex as technical director
4 hours ago

Plans go in for tallest tower in the City of London

"Tulip" next to the Gherkin will let visitors ride down facade in glass gondolas
22 hours ago

Byrne Group FD steps down

Daren Harris leaves firm after three years in post
5 hours ago

£160m RAF contract win for Kier and VolkerFitzpatrick

Joint venture to make RAF Lakenheath ready for US Air Force F-35 Fighter Jets
15 hours ago

Balfour Beatty on the hunt for highways subcontractors

Supplier engagement day in Crewe: Register now
20 hours ago

Bid race starts for £435m HS2 Birmingham station

Four firms to be shortlisted to tender project in May
1 day ago

Mears buys Mitie housing upkeep arm for £35m

More than 1,000 Mitie Property Management staff to transfer to Mears
1 day ago

Expanding Weston Homes invests in logistics division

South east house builder on growth push as profits jump over 50% to £35m
1 day ago

Blu-3 bags enabling works for £1.1bn Stratford scheme

Firm to start £5m Stratford Waterfront utility works later this month
22 hours ago
blu-3 (UK) Limited

Interserve fined after M&E blunders at animal lab

Court hears how inadequate maintenance posed potential risks from harmful biological agents
1 day ago

Plans in for 42-storey Ilford residential tower

Skanska on board to build landmark tower next to Ilford Crossrail station
1 day ago

Construction’s most considerate companies revealed

Full details now available of latest Considerate Constructors Scheme winners
1 day ago

Green light to redevelop Dragon’s Den into offices

L&G JV backs London warehouse studio redevelopment to offices
1 day ago

Union demands “toilet dignity” for construction workers

Unite threatens to name and shame guilty firms
1 day ago

Winners revealed of £22m fund for on-site training hubs

Full list of 26 winners for new initiative to train on live construction sites
4 days ago

Boost your online presence – join the new Enquirer Directory

New site for suppliers and buyers will showcase their products, services and latest stories
7 months ago

Kier on track with debt reduction efforts

Kier chief says firm is chipping away at £410m debt mountain
4 days ago

Bouygues UK south east chief exits

Darren Gill leaves after 22 years at Bouygues Construction
4 days ago

Wates wins £82m London Haringey tower job

Work starts on developer Anthology's 32-storey Hale Works resi block
4 days ago

B&K tipped for £60m Nottingham HMRC hub

Developers seal forward funding for Unity Square scheme
5 days ago

Regal to build £55m Lords retirement homes block

Over 55s housing scheme will be build next to London cricket ground
5 days ago

Caledonian takes £25m Wembley student pods order

Offsite specialist will deliver 680 bedroom modules for high-rise First Way Campus
5 days ago

Robertson wins pair of Glasgow hotel jobs

Marriott and Moxy hotels to be built next to SSE Hydro venue
5 days ago

Kier raises £24m from Australian road business sell-off

KHSA road assets and management services business offloaded to pay down debt
5 days ago

Wates rejigs construction senior management

Mark Tant promoted to new managing director role at construction division
6 days ago

Stansted Airport expansion wins council approval

Ambitious airport expansion plans scrape through local planning
5 days ago

Robot bricklayer builds house in under three days

Tech company hails a "quantum leap for the construction industry"
5 days ago

Lendlease lands Oxford Street office and retail scheme

Main construction work to start early next year at Oxford House
5 days ago

Green light for 335 PRS flats in Sheffield

Work to start next year on multi-block Sylvester Street scheme
5 days ago

Contractor services