The UK’s largest property development companies are “sitting on” their cash for more than two weeks rather than paying their small UK construction firm contractors, according to a study by alternative financing company, Funding Options. It found that the top 20 property developers hold a free float of 17 days’ cash, “damaging contractors’ growth prospects and in some cases threatening their viability”.
The study looked at payment behaviours over the last two years and showed that smaller suppliers in the UK construction industry, such as plumbers and electricians, are waiting up to 56 days for payment. This is up from 54 days in 2015 and 48 days in 2014. Property developers themselves are paid by their customers in 39 days.
This delay in payment is affecting the sub-contractors as they struggle to meet obligations such as wage bills. Future growth is also being hampered as smaller companies find it difficult to bid for new business.
Conrad Ford, CEO of Funding Options said, “Smaller sub-contractors face the risk of bankruptcy if they are not paid within a reasonable amount of time. Major developers feel they have a lot to gain from delaying payments, knowing that their sub-contractors would be hesitant to raise their issues for fear of losing out on future work. There seems to be only two choices for the suppliers: accept these slow payments or lose the business going forward.”