Companies specialising in leasing equipment to the UK construction and building industry are being badly affected by poor payment practices, according to new research commissioned by Creditsafe.
Almost half of these firms (47%) have seen customers try to renegotiate the terms of their original hire agreements in the last 12 months, and 59% have experienced an increase in late or defaulted payments.
“The construction industry continues to face difficult trading challenges,” said David Knowles, business development director at Creditsafe. “Renegotiation of fixed contracts makes financial forecasting extremely difficult in a sector of the construction industry where profits are only generated by leasing firms in the medium to long term after making an extensive capital outlay and taking on significant financial risk. Balance sheets of firms hiring construction equipment have taken significant hits from the combined impact of late payments and customers entering insolvency.”
In the last 12 months alone, 65% of companies operating plant hire companies and leasing equipment to the construction industry have lost money as a result of customers becoming insolvent.
Knowled continued: “It is crucial that companies take every step they can to protect themselves against the risk of defaulted payments. When dealing with customers who are on extended contracts, where monies are not paid up front, it is vital people continually check the ongoing financial health of customers. Companies can run into trouble extremely quickly – even if they filed healthy accounts in April, they may find themselves in difficulties by June.”