Tales of dealing with so called cowboy builders are frequently rolled out but now new research show that builders also have to deal with cowboy clients who don’t pay in time and can threaten the future of their business.
Three quarters of small and medium sized builders say they have experienced clients hampering their business with fewer than a third paid within the usual 30 day standards, according to research from the Federation of Master Builders (FMB).
Indeed, almost a quarter report that they have had to wait for more than four months for payment from a client or large contractor with 30% paying suppliers late as a result.
The research also shows that 20% say late payments have stopped them from having the confidence to grow their business, 16% had to borrow additional funds from a bank or other lender, 8% almost went out of business, 5% had to withhold wages and salaries from staff and 4% had to let staff go.
‘There are so many horror stories of people being duped by cowboy builders. However, our research shows that there’s a flip side to this story with three quarters of small construction firms being hampered by cowboy clients,’ said Sarah McMonagle, director of external affairs at the FMB.
She explained that typical cowboy client behaviour can include a demand for the builder to complete tasks not included in the original brief or quote and for no extra payment. The worst type of cowboy client seeks to delay or withhold payment on spurious grounds, for instance by discovering make believe faults.
‘Nearly a quarter of construction SMEs have had to wait for more than four months for payment from a client or large contractor. Fewer than one third of builders are always paid within the standard period of 30 days and this is completely unacceptable,’ McMonagle added.
She also pointed out that late payment is having a direct impact on the ability of construction SMEs to grow and prosper. ‘As we edge towards Brexit, we need the construction sector to be firing on all cylinders to shore up the wider economy. The last thing we want to see is thousands of builders going to the wall because of their customers refusing to pay on time,’ said McMonagle.
‘We strongly recommend that builders and clients do everything they can to protect themselves by using a written contract that includes an agreed payment schedule. Clients rightly demand a high level of service from their builder but home owners also need to keep their end of the bargain by paying on time,’ she added.
According to Steve Mansour, chief executive of CRL, strong cash flow is vital for small builders. ‘Late payment cripples small and medium sized builders and developers. It’s no surprise that one in 10 firms go under as a result of companies not settling invoices on time,’ he said.
‘What the construction industry needs is action. As we enter 2018, strong cash flow will be vital to SME house builders across the UK. We have two choices: grasp the nettle and deal with this within our industry, or face the reality that legislation will eventually be put in place. Either way, late payment is a problem which must be eradicated,’ he added.
