50% of SME construction business owners have felt the effect of mental health issues due to late payments from their customers, according to a survey conducted by The Prompt Payment Directory.
Out of the 400 SME owners who took part in the survey, 48% revealed that they have suffered from an increase in stress levels, anxiety, depression and other forms of mental health issues over the past year. This has soared from 27% during 2017.
Brian Berry, Federation of Master Builders chief executive has said that the outcome of the research is “extremely wrong” and that poor payments have been “accepted as the norm for too long.”
The research also found that the effect of late payments and a weak cashflow has increased since last year while 74% of business owners have admitted it has driven their business to the edge of closing down which ultimately may happen if the issues continue rising – this is up from 44% last year.
Begbies Traynor have announced that construction firms who are undergoing financial distress has climbed by 26% during quarter one this year to 60,000 plus which is compared to 48,000 during the same period in 2017.
Managing Director, Hugh Gage from Prompt Payment Directory has commented;
“Recent high-profile cases such as Carillion have made many more people aware of the cost of late or non-payments and how it can affect smaller construction firms, but in reality, this has been going on for years.
When it comes to the reasons for late payments, a third of SMEs have said it was down to their clients not being paid on time themselves, a quarter said the reason they hear often is that “the accounts person is away.”
The levels of pressure on the government is increasing for them to act on late payments – 355,000 construction trade bodies have recently petitioned Downing Street for payment practises and retentions.
“We are calling on the government to introduce a retentions deposit scheme to protect SMEs in the supply chain when things go wrong at the top.
“If the government fails to act, it risks the financial wellbeing of the construction sector, as well as the mental health of those who work in it.”
Managing Director of Businesscomparison.com, Philip Brennan also comments;
“Promises have been made to improve matters for business in terms of late payments. Unfortunately, not much has changed yet. As pressure has been put on businesses to reduce use of plastic and many businesses have now made changes by their own accord for the good publicity it gives them. It would be good if large businesses would sign up to ethical way of dealing with suppliers which would help smaller business, and this would in turn be passed down through the food chain.”