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The £10,000 per year write off

Bibby Financial Services has discovered that construction firms in the UK write off more than £10,000 each per year when customers do not pay. Our latest report entitled Planning for Growth, highlighted the figure when we studied 200 small construction businesses in 2014.

Over 70 per cent of SME construction firms have suffered bad debt over the past three years. The average amount scrapped by these firms during this period was £30,465. This equates to a stunning £1.9bn each year across the construction sector.*

These figures only serve to show the benefits of invoice finance services to construction businesses, these services don’t just help with financing, they assist with debt collection and debt enforcement too.

Bad debt protection

Our own Helen Wheeler who is Managing Director of Construction Finance at Bibby Financial Services, said: “Bad debt is a serious issue for many construction businesses and represents a huge leakage in terms of sector output. Non-payment can occur due to customer insolvency, payment default or dispute and the issue is severely problematic for smaller firms who have often already footed the bill for labour and material costs.”

Helen went onto explain: “This places a massive strain on these businesses, often causing viable firms to fold. The problem is particularly acute for those who do not have sufficient working capital or bad debt protection in place to cover against this situation,” Helen added. “Even if the business isn’t crippled in the long term, this £10,000 could be invested into growing their business or taking on an apprentice.”

The Vinden Partnership 

The report was developed with the help of construction industry experts The Vinden Partnership and Managing Director Peter Vinden said payment disputes are routine within the construction sector. Peter explained: “Disputes and litigation are a common occurrence in the industry, but often smaller firms and subcontractors do not have either the legal expertise or financial resources to pursue action which would ensure they receive the amount owed from customers.

“Furthermore, clauses imposed by larger contractors are becoming increasingly onerous and this is a significant issue for many of the businesses we speak with. There is also increasing evidence of contractors seeking extended credit from the supply chain and the number of adjudication appointments is showing a sharp increase in payment disputes.”

BIBBY FINANCIAL SERVICES

As the UK’s leading independent invoice finance specialist and a trusted provider of cashflow funding to over 7,000 businesses, Bibby Financial Services provides a range of finance solutions for companies in over 300 industry sectors.

For more information about Bibby Financial Services’ cashflow solutions, visit: www.bibbyfinancialservices.com or call 0800 91 95 92.

*Figure based on 70 per cent of the UK’s 280,000 construction firms (196,000) each losing £30,465 over three years. This £5.97bn equates to £1.9bn per year.

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