The UK’s statistics body, the Office for National Statistics (ONS) released January’s construction output data on Friday 9th March which showed the sector declined 3.9%, compared with that of a year earlier.

The data revealed that declines were evidenced across all major categories, with ‘new work’ being most heavily affected, falling by 4.8% since December 2017.

Q4 2017 (Oct-Dec) data was also finalised, which showed that new orders decreased by 25% vs. Q3 2017, yet it should be noted that this is somewhat inflated as several large High Speed 2 (HS2) orders were awarded in Q3 2017.   Overall, as new work accounts for approximately two-thirds of total work in the sector, the trends evidenced showcase the challenges the industry is facing.

Ole Black, a senior statistician at the ONS, said: “Construction continues to be a weak spot in the UK economy with a big drop in commercial developments, along with a slowdown in housebuilding after its very strong end to last year.”

This decline in house building is of key concern.  Despite Theresa May’s recently announced planning reforms, rising interest rates, and broader economic uncertainty from Brexit and other geopolitical events continue to weigh heavily on sentiment.

Earlier this month, the Royal Institution of Chartered Surveyors (RICS) reported that the net balance for new buyer enquiries remained in negative territory for the 11th consecutive month in February.  It’s clear that the Government incentives to promote new builds aren’t resulting in the desired impact and RICS data backed this up with only 12% of chartered surveyors thinking the Government will succeed with its targets.

More broadly, industry concerns and the flow-on effect from the Carillion saga (and more recently Interserve) have meant that late payment tactics are creeping back into the sector.

Our Senior Partnerships Manager, Craig Flyger, commented that customers are now being asked to accept unacceptable payments terms from their larger contractors. “We’re having businesses being forced without notice to move from electronic payments to cheques. Larger players are using every trick in the book to preserve their own cashflow.  The impact of this is significant when businesses are paying their own subcontractors weekly, however are being forced to wait an additional 10-14 days for payments to clear.”

Unfortunately, this type of behaviour is nothing new for SMEs in the construction industry, as we’ve previously reported.  SMEs in this space are unfairly disadvantaged, with two-thirds not being paid on time and 30% of businesses stating that they’ve actively had to delay payments to suppliers and at times, staff.

As the operating environment remains challenging, now is a key time for SMEs to remind themselves to remain vigilant of these tactics.  It’s important that business owners and their accounts team keep a close eye on cashflow and hold late-payers accountable if funds are not arriving under contractually agreed terms.

There are many options available to SMEs facing payment headwinds and resulting cashflow pressure, or for those who are concerned around the credit-worthiness of their head contractors.  The invoice finance market has evolved rapidly in the past 5 years and MarketInvoice specialises in producing bespoke solutions for SMEs who require working capital support.

These solutions can also be coupled with bad-debt protection insurance via our partnership with Euler Hermes, which offers a safeguard against significantly overdue invoicing.  This can give much needed peace of mind to businesses owners who are concerned about the level of money they are owed from their core customers.

With rising interest rates, muted housing confidence, Brexit uncertainty and shockwaves from the fallout of Carillion, these type of payment issues could well become the new norm for the industry.

However, the good news is that with our smart technology and great customer service, MarketInvoice can help tailor the right solution for a variety of needs.