Late payment by customers is a key factor in one in five corporate insolvencies, with construction the hardest hit sector, says the body representing insolvency practitioners.
The findings of a ComRes survey of R3 members, published on 11 April, also found that 47 per cent of corporate insolvency practitioners had seen at least one case where late payment was a primary or major factor in a business’ failure in the last year.
R3 president Liz Bingham said: “Even if a business has a great business model and great products and services, it won’t actually be profitable or successful until it gets paid for what it sells. Late payment is a threat that businesses need to take very seriously indeed.
“The late payment problem can have significant knock on effects within the economy too. The failure of one company can lead to even more unpaid bills and financial problems for others.”
In 2012, one in five liquidated companies in England and Wales were in the construction sector and the research found that 59 per cent of corporate insolvency practitioners considered the construction sector had the worst track record for paying bills on time.
In comparison, five per cent identified the wholesale and retail sectors as the worst for lay payment while only three per cent named manufacturing, the public sector, and hotels and restaurants.
Ms Bingham added: “The construction sector is notorious amongst insolvency practitioners for its late payment problems, which are almost endemic to the sector. Businesses in the sector are also particularly vulnerable to insolvency. Almost every quarter, the construction sector sees the highest number of liquidations.
“A high number of insolvencies and a late payment problem aren’t a coincidence. Action on late payment would result in a healthier construction sector.”
Businesses facing financial challenges should always seek professional advice, at the earliest possible stage, to help identify options for resolving difficulties and make informed decisions about the way forward. Palmers can provide expert advice on a wide range of insolvency matters – for more information, please visit our website or contact Andrew Skinner.
Our expertise in construction law includes all aspects of contracts, including clauses relating to payment issues, such as progress payments, retention, time for payment and final payment. For more information, please contact Adam Davis.