New research commissioned by The Prompt Payment Directory (PPD) has revealed the extent to which smaller construction firms are on the brink of bankruptcy or liquidation, with rising numbers of construction business owners suffering depression, anxiety, stress and ‘extreme anger’.
PDD revealed that the number of small construction firms struggling financially has risen dramatically since last year, as too has the number of company owners suffering from mental health issues as a result of poor cashflow.
The findings come amidst fears over the knock-on effect to the supply chain following the Carillion collapse earlier this year.
According to the findings, 74% of the construction companies polled – 30% more than last year – have been on the brink of bankruptcy or liquidation, or could be soon due to late payments. Additionally, 48% – nearly a quarter more than last year – blamed poor cashflow for their panic attacks, anxiety and depression, with some even having suicidal feelings and almost a quarter (22%) experiencing emotions of ‘severe anger’.
Sixty-two per cent of owners said late payment issues had also meant that they had not paid themselves for some time, 35% had stopped or delayed bonuses, 15% had had to pay staff late and 17% had reduced their own salary.
If customers continue to pay late, 30% of construction company owners said it will soon affect the progress and growth of their business, while 30% said it had already impacted staff morale, recruitment and retention. Another 38% struggled to pay business rates and a quarter had struggled to pay mortgage or rental payments on their office.
PPD’s findings come after the government’s Prompt Payment Code (PPC) and last April’s enforcement of the government’s new ‘Duty to Report’ scheme that requires large companies to report on payment practices twice a year. It also follows official figures confirming that the number of British businesses going bankrupt reached a four-year high for 2017, with one in every 213 companies falling into liquidation – the highest since 2013.
The survey polled 400 owners, MDs and CEOs of small construction businesses who suffer from poor cashflow due to late or outstanding invoice payments. The research examined the personal, financial and business impact of late payments on owners and found the issue had worsened since PPD’s first study was launched last spring.