Debt crisis leaves vulnerable construction firms suffering, says Debt Guard

Published:  21 July, 2014

According to Debt Guard Solicitors, construction small & medium enterprises (SMEs) were burdened with an average trade debt of £484,000 during the last financial year. They suggest that the strain on the sector's smallest firms remains severe despite the economic upturn.

According to Debt Guard Solicitors, construction small & medium enterprises (SMEs) were burdened with an average trade debt of £484,000 during the last financial year. They suggest that the strain on the sector's smallest firms remains severe despite the economic upturn.

Debt Guard found that companies with 10 to 49 employees and a turnover between £2 million to £10 million were the worst hit, each with an average £627,000 in debt, accounting for 16% of total turnover.

The findings were based on account details submitted to Companies House by 550 construction SMEs. They brought attention to the problem of late payment, which is "endemic" in the sector, according to R3, the trade body for Insolvency Professionals.

Medium-sized companies with 50 to 249 employees and a turnover between £10 million to £100 million, had the highest levels of SME trade debt at £969,000. However, this accounted for 13% of turnover.

Mark Burgess, chief operating officer at Debt Guard Solicitors, said: “This research highlights the financial headache caused by outstanding and unpaid bills in the construction sector. It is clear that smaller builders in particular need much greater support in this respect, as many are facing the very real threat of closure due to trade debt pressure.

“Our message to all SMEs struggling with late payment is, ‘don’t write off your debt’, look at legal ways to professionally recover it as, by improving credit flow, this will help put your business on a more stable financial footing.”

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