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£12.8bn needed every year to end the housing crisis

New research from the National Housing Federation reveals that the Government must invest £12.8bn a year to finally end the housing crisis in England.

Over ten years, this investment would kick start a nationwide housebuilding programme of around 1.45 million social homes to rent and shared ownership properties to buy across the country. It would stimulate the economy and help more buyers to get on the housing ladder, all while ensuring that millions of people no longer get stuck in inappropriate homes or on the streets.

Now, a coalition of leading housing groups and charities is calling for the Government to make this significant investment in ending the housing crisis. This includes the National Housing Federation – which represents social landlords to six million people – Shelter, Crisis, CPRE, and the Chartered Institute of Housing.

By investing £12.8bn per year, in today’s prices, they argue that the Government would take spending levels back to those last seen under Churchill’s government in the early 1950s, when enough homes were being built to meet the country’s needs.

The coalition argues that a stimulus from the Government is the only way to solve the housing crisis, since the private market alone cannot build the quantities or types of homes the country needs.

Over the course of ten years, this Government investment would amount to £146bn, including inflation. This would cover about 44% of the total cost of this construction boom, unlocking the rest of the money which can then be raised from other sources.

The research also finds that investing in new homes would add £120bn to the economy each year, through the creation of local jobs in construction and other industries across the country. Effectively, every pound spent by the Government would generate at least £5, boosting the economy in a balanced and sustainable way.

It would also reduce the Government’s benefit bill over the course of the decade. Last year, the Government paid £22.3bn in housing benefit, a significant amount of which went into the pockets of private landlords to help cover rent for millions of low-income tenants. By moving many of these tenants into social housing, the Government would need to spend less on housing benefit over time, and so could save taxpayers tens of millions of pounds every year. This would also allow more people to build a solid foundation for their lives in social housing, aiding social mobility.

This new financial modelling is based on research, conducted by Heriot Watt University for the National Housing Federation and the homelessness charity Crisis, which showed that England needs to build 145,000 social homes every year for the next decade to both clear the current backlog of people who need a home and meet future demand.

Last year the Government spent £1.27bn on affordable housing, making housing one of the smallest government budgets, down 70% on 2010 levels. As a result, far fewer social rented homes are being built. In 2017/18, just 5,400 were built, compared to almost 36,000 in 2010/11 before funding was cut.

The chronic under-investment in housing has led to a 169% increase in rough sleeping, while the number of households in temporary accommodation is at a 10-year high. What’s more, 1.3 million children are currently living in poverty in expensive privately rented accommodation, while many young people are stuck at home with their parents, unable to build an independent life and start families of their own.

Kate Henderson, Chief Executive of the National Housing Federation, said “The housing crisis is an economic, social and human catastrophe. But it can be solved. And now, for the first time, we know exactly how much it will cost. By investing £12.8bn in affordable housing every year for the next decade, the Government can ensure millions of people have a stable and affordable place to live, at the same time as strengthening the economy across the country.

“By investing this money in affordable housing at the upcoming spending review, the Government can help families all across the country to flourish. They can help children get out of poverty, give young voters a foot up on the housing ladder and help out private renters who have to empty their bank account every month.

“As well as being the right thing to do, investing to end the housing crisis also carries huge economic benefits. It will advance the country’s productivity, boost its economic growth and lower the benefit bill over time.”

Polly Neate, chief executive of Shelter, added “The steep decline in social housing is at the core of the housing emergency that now effects so many. Social homes are what this country wants and what it needs – they are the best solution to the problems we face and an opportunity to unite the country.

“Successive governments have failed to build social housing – while homelessness spirals and half of young people will never be able to buy. Now is the time to act for the millions of people trapped in housing poverty, and invest real resources where it matters most.

“Charting a course to build a new generation of social homes must be a key test for whoever walks through the doors of Number 10. The race to eradicate homelessness and provide millions with a stable home, is a race that every politician should be trying to win.”

Jon Sparkes, chief executive of Crisis, concluded “Right now, thousands of people across England are finding themselves on the brink of homelessness or are already experiencing it, in large part because of our huge shortage of social housing.

“The good news is we know it doesn’t have to be this way – and we know why this situation must change urgently. Homelessness has devastating effects on people’s mental and physical wellbeing that no one should have to experience. This can’t go on.

“Ultimately Government must invest in the number of social homes we need. Not only will this save the country millions of pounds in the long term, it will help us end homelessness once and for all – something we can’t afford to put off any longer.”

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Remove barriers to small house builders to deliver more homes

The Government needs to do more to remove the barriers to small to medium-sized (SME) house builders if its housing targets are to be met, according to industry experts the Federation of Master Builders, in response to the House of Commons Public Accounts Select Committee report, ‘Planning and the broken housing market’.

Brian Berry, Chief Executive of the Federation of Master Builders, (FMB) said “SME house builders are continuing to face numerous barriers to increasing their capacity to build the homes that are needed. The recommendations in the Public Accounts Committee’s report highlight that the planning system is delaying progress. It is completely unacceptable that sites are being stalled because planning departments are not dealing with applications quickly enough. Our members aren’t seeing any improvements in service since fees were increased in January last year – a policy the FMB supported.”

“The report finds that, as of December last year, only 42 per cent of local authorities had an up-to-date local plan which is truly disappointing. By allocating small sites for housing delivery in their local plan, local authorities will be reducing the burden of uncertainty for the nation’s small house builders, and therefore speeding up housing supply through better diversifying the sector. Furthermore, we must not forget the highly positive impact that these local businesses have on their areas, offering employment and training opportunities to local people.”

“Access to finance for SME house builders has undoubtedly improved over the last few years but the loan to cost ratio from most lenders is simply unviable for SMEs – especially the micro firms, building fewer than five units a year. The FMB House Builders’ Survey 2018 found respondents estimated that they could increase their out by 38 per cent if they could achieve a loan to value/cost ratio of 80 per cent. Government must work with the finance sector to understand how lending to small house builders can be increased and improved. The time is now for the Government to heed the warnings of the Public Accounts Committee.”

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Over 70% of small construction firms on a knife edge due to late payments

New research reveals 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.’

Worst excuses for late payments include: ‘the money for your invoice was eaten by our bank overdraft, ‘the dog ate your invoice’ and ‘your cheque blew out of the window’ while most common excuses include:

  • We can’t pay until own customers pay their overdue invoice (32%)
  • The accounts person is away (23%)
  • We can’t pay until business turnover improves (17%)

Latest research reveals 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.

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. 48% – also nearly a quarter more than last year – blame 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’.

62% 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, 38% had struggled to pay business rates and a quarter had struggled to pay mortgage or rental payments on their office.

The research commissioned by The Prompt Payment Directory (PPD), a payment rating website for businesses, comes despite 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. Ahead of Mental Health Awareness Week (14-20 May), 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.

The personal cost

Key findings for 2018 compared to last year include:

The impact of late payment/and the knock-on effects to SME construction owner’s personal life 2018 2017
Is the business on the brink of bankruptcy or liquidation as a result of late payment, or will be soon if more payments are made late? 74% 44%
Not paid self for period of time 62% 44%
Caused loss of sleep 80% 53%
Caused depression, anxiety, increased stress of other mental health related illness 48% 27%
Put pressure on marriage/relationship with partner 33% 14%
Refused credit 36% 17%
Struggled to make house mortgage or rental payment 36% 11%
Sold and downsized the family home or had to move into rental property 25% 9%

33% of SME construction company owners had been forced to sell assets such as property, shares and pension plans to make ends meet whilst nearly 10% had put plans on hold to grow their family and 11% can no longer afford to pay for school trips, clubs or tuition fees for their children.

19% had cut back on their social activity like going to the cinema, eating out or drinks with friends, 16% had cancelled their family holiday and 8% had sold or downgraded their car.

Mental health issues

Out of the increased number of construction owners now suffering from health related issues due to late payments, 45% suffer from stress, 39% struggle with insomnia, 16% experience depression and 14% experience anxiety and panic attacks, whilst the remaining stated issues such as having suicidal feelings, self-harm, eating problems and paranoia.

Effects on staff

Late payments have also had a strong knock-on effect on staff, PPD’s research has revealed.

Half of the construction owners polled had either paid their staff late, stopped or delayed bonuses, while nearly 5% said they had had to stop or reduce staff perks such as company phones, cars or health insurance.

Unfair practices

A staggering 73% said they were victim to long payment terms beyond the Prompt Payment Code recommended payment terms of 45 days pays. A third said they had been on the receiving end of mid contract terms to payment terms, 17% had been asked for retrospective discounting and 15% had been asked to ‘pay to stay’, or face supplier delisting.

Hugh Gage, Managing Director of The Prompt Payment Directory said “Recent high profile cases such as Carillion have made many more people aware of the cost of late or non-payment and how it can affect smaller construction firms, but in reality this has been going on for years.

“Our latest research reveals that the impact of late payments has got even worse since last year and is having even deeper repercussions on smaller companies nationwide, it’s affecting and even destroying people’s business, health and lives.

“Construction business owners need to arm themselves against some of the most common late payment issues and fight back against these poor practices as it’s always best to try and avoid them from the outset by using due diligence through credit reference agencies, or services such as The Prompt Payment Directory which rates businesses’ payment behaviour by those that it affects – their suppliers.”

Handling common late payment excuses

1) “We can’t afford to pay the bill”
Firstly, stop supplying and don’t make the problem any worse. Agree a payment plan to reduce the debt. If the organisation is keen for you to continue to supply because they need what you have to keep trading, establish their plans for getting out of the situation and check if they’re really viable. If you do choose to support them, protect yourself with robust terms which includes payment with order – an instruction to the buyer’s bank to make a payment or series of payments to you on an agreed regular date.

2) Accounts not in/is away
While this can sometimes be a legitimate excuse, you need to convince the business you can’t or shouldn’t have to wait until the next time they’re in the office to get paid. Support calls with an email. If you can’t get through, escalate the problem to the buyer, business owner or the relevant department, outlining what you need to happen and how to follow up in the most appropriately way. You should also remind the customer of any provisions around late payment – such as charging of interest and how their intervention will keep any additional costs in check.

3) Your cheque is in the post
Technology may have moved on but unfortunately even in this electronic age many businesses still insist on paying by cheque and this is one of the popular ‘fob offs’. Ask for the date it was sent, class of postage and the cheque number. If they can’t give you a cheque number ask why not? If it has been more than a week and it has still not arrived, ask them to cancel the cheque and send replacement by BACS/Faster payment and assure them the cheque will be returned or destroyed if it does arrive. You do have every right to refuse cheques, so look at your customer demographic and decide if this is a risk you’re willing to take if they refuse to comply.

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Small builders resilient despite material price hikes

The workloads of small and medium-sized (SME) construction firms grew slightly in the first three months of this year despite record numbers of builders reporting rising material prices, according to the Federation of Master Builders (FMB).

Key results from the FMB’s latest State of Trade Survey, which is the only quarterly assessment of the UK-wide SME construction sector, include:

  • Construction SME workloads remained positive in Q1 2018 but grew at a slower rate than in Q4 2017
  • The construction SME sector has now enjoyed five years of consecutive growth
  • More construction SMEs predict rising workloads in the coming three months, up from 38% in the previous quarter to 49% in Q1 2018
  • 90% of builders reported increasing material prices in Q1 2018, this is the highest reading on record
  • More than half (58%) of construction SMEs are struggling to hire bricklayers and 55% are struggling to hire carpenters and joiners
  • Two-thirds (66%) of construction SMEs expect salaries and wages to increase during the next six months, up from 62% in the previous quarter

Brian Berry, Chief Executive of the FMB, said “Workloads for builders continued to grow in the first quarter of 2018 despite the ‘Beast from the East’ wreaking havoc across the UK’s construction sites. However, once again, the growth we are seeing is slower than in the previous three months and this can be partly attributed to pressure from rising costs. Indeed, 90% of builders reported increasing material prices in the first three months of 2018 and this is the highest reading on record. Insulation, bricks and timber are the materials that have increased the most and builders are predicting that these price increases will continue. We are also seeing increased salaries for tradespeople stemming from the acute skills crisis and that, coupled with material price hikes, are squeezing margins and stifling growth for construction firms of all sizes.”

“In terms of house building, these latest results should sound some alarm bells with the workloads of SME house builders dropping off in the first quarter of this year. In 2017/18, 197,000 homes were started in England but this is some way off the Government’s target to build 300,000 homes per year. The FMB has worked closely with the Government to identify how to remove barriers to small local house builders, but these latest results act as a reminder that there is more to be done. The FMB would now like to see the continued and speedy implementation of some positive Government policies designed to bring forward more small sites, properly resource planning departments and increase the flow of finance to SME house builders. If we are to reach our ambitious house building targets, we cannot rely solely on the largest house builders.”

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Material prices continue to rocket

More than half of small building firms say that rising material prices are squeezing their margins and the same percentage have had to pass these price increases onto consumers, according to the latest research by the Federation of Master Builders (FMB).

Small and medium-sized (SME) building firms were asked which materials are in shortest supply and have the longest wait times. The average results were as follows (in order of longest to shortest wait times):

  • Bricks were in shortest supply with the longest reported wait time being more than one year
  • Roof tiles were second with the longest reported wait time being up to six months
  • Insulation was third with the longest reported wait time being up to four months
  • Slate was fourth with the longest reported wait time being up to six months
  • Windows were fifth with the longest reported wait time being more than one year
  • Blocks were sixth with the longest reported wait time being up to four months
  • Porcelain products were seventh with the longest reported wait time being more than one year
  • Plasterboard was eighth with the longest reported wait time being up to two months
  • Timber was ninth with the longest reported wait time being up to two months
  • Boilers were tenth, with the longest reported wait time being more than one year

SME building firms were also asked by what percentage different materials have increased over the past 12 months. On average, the following rises were reported:

  • Insulation increased by 16%
  • Bricks increased by 9%
  • Timber increased by 8%
  • Roof tiles increased by 8%
  • Slate increased by 8%
  • Windows increased by 7%
  • Blocks increased by 7%
  • Plasterboard increased by 7%
  • Boilers increased by 7%
  • Porcelain products increased by 6%

The impact of these material price increases includes:

  • More than half of construction SMEs (56%) have had their margins squeezed, this has gone up from one third (32%) reporting this in July 2017
  • Half of firms (49%) have been forced to pass material price increases onto their clients, making building projects more expensive for consumers, this has gone up from less than one quarter (22%) reporting this in July 2017
  • A third of firms (30%) have recommended that clients use alternative materials or products to those originally specified, this has gone up from one in ten reporting this in July 2017
  • Nearly one fifth (17%) of builders report making losses on their building projects due to material price increases, this has gone up from one in ten reporting this in July 2017

Brian Berry, Chief Executive of the FMB, said “Material prices have rocketed over the past year. The reason for this could include the impact of the depreciation of sterling following the EU referendum still feeding through. High demand due to buoyant international markets could also be contributing to price increases. What’s particularly worrying is that when prices have increased mid-project, almost one fifth of builders have absorbed the increase and therefore made a loss. Also, if material price increases weren’t enough of a headache for building firms, they are also experiencing material shortages with wait times ticking up across a range of materials and products. Worst case scenarios include firms waiting for more than one year for a new order of bricks.”

“The rise in material prices is not just a problem for the country’s construction firms – it is also a problem for home owners. Half of firms have been forced to pass these price increases onto their clients, meaning building projects are becoming more and more expensive. This problem has worsened recently with more than twice as many firms passing material prices on to their clients now compared with nine months ago. What’s more, home owners should be prepared to have to use alternative materials or products to their first choice. One third of firms have recommended that their clients should use alternative materials or products to those originally specified. Now more than ever, it’s important that builders and their clients keep the lines of communication open in order to stay within time and within budget. Specified products or materials may need to be swapped for alternatives or clients will need to accept the additional cost.”

“We are calling on builders merchants to give their customers as much advance warning of forthcoming material prices increases or wait times as possible so that firms can warn their customers and plan ahead. We are also advising builders to price jobs and draft contracts with these material price rises in mind. The FMB’s latest State of Trade Survey shows that almost ninety per cent of building firms are expecting further rises over the next sixth months. This makes quoting for jobs difficult but if builders flag the issue to their client from the outset, and include a note in the contract that prices may be subject to increases, they shouldn’t be left short. What we don’t want is for the number of building firms making losses on projects to increase as this could result in firms going to the wall. A large number of collapsing construction companies will have a terrible knock-on effect in the wider economy.”

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Soaring material prices hampering small building firms

A third of small building firms say that soaring material prices are squeezing their margins and almost a quarter have had to pass these price increases onto consumers, according research by the Federation of Master Builders (FMB).

Construction SMEs have reported a range of material price increases since the depreciation of sterling following the EU referendum in June 2016. Small building firms were asked which materials have increased the most and the results were as follows:

  • Timber
  • Insulation
  • Bricks
  • Blocks
  • Windows
  • Plasterboard / Slate (joint sixth)
  • Boilers and radiators
  • Porcelain products

The impact of these material price increases includes:

  • 85% of builders think material price rises could drive consumers to hire rogue traders in an effort to save money on their building projects
  • One third of construction SMEs (32%) have had their margins squeezed
  • Almost one quarter (22%) have been forced to pass material price increases onto their clients, making projects more expensive for consumers
  • More than one-in-ten builders report making losses on their building projects due to material price increases

Brian Berry, Chief Executive of the FMB, said “Material price increases have left builders under severe pressure. This research shows that following the fall in the exchange rate, timber is the material that the majority of builders say has increased most in price but the problem doesn’t end there – everything from insulation to windows to bricks and blocks are soaring in price. A third of builders report that these price increases are eating into their already razor-thin margins – and this on top of increased wages and salaries stemming from long-term construction skills shortages. Furthermore, one-in-ten builders say that they’ve actually made losses on projects due to material price increases – this is most likely to happen when a particular product or material jumps up in price mid-project when then builder has already quoted for the work. Perhaps unwisely, some builders are absorbing these extra costs as opposed to re-quoting for the project.”

“Material price spikes aren’t just a problem for builders – they’re also a problem for the home owner, with almost one quarter of builders saying that they have had to pass on price increases to their clients. This means that building projects now cost significantly more than they did this time last year. What with stagnant wages and price inflation across the economy, consumers are feeling the pinch and it might be that they decide not to commission that loft conversion or extension after all. Or worse still, 85% of builders believe that home owners will be tempted to hire rogue traders who are quoting a lower price than a professional building firm such as those that belong to the FMB. If that’s the case, material price rises could lead to a flurry of botched jobs and distressed consumers. We’re calling on home owners to hold their nerve – they’re better off commissioning a more modest project from a professional builder than a high spec project from a cowboy. Don’t take the risk.”

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Chancellor must improve access to finance for small builders

The Chancellor must take bold action in the forthcoming Budget to improve access to finance for SME builders if he wants to tackle the housing crisis, according to the Federation of Master Builders (FMB).

Brian Berry, Chief Executive of the FMB said “If the Government wants to solve the housing crisis, it must address the access to finance issue that local housebuilders continue to face. The Chancellor needs to commit to underwriting loans from banks to small house builders to get finance flowing into our sector once more. Nearly a decade after the financial crisis, difficulty in accessing finance remains a major barrier to small house builders increasing their delivery of new homes. Indeed, the FMB’s 2017 House Builders’ Survey showed little signs of improvement in this picture and if anything suggested slight deterioration in lending conditions. Assessments of lending conditions to SME developers were down slightly from 2016, the first fall in this measure since 2013. These difficulties make it much harder for existing SME house builders to flourish and grow and deter new firms from entering the market. This has resulted in a less dynamic house building sector that is less able to expand to build the homes we need.”

“If local housebuilders are to build Britain out of the housing crisis, the Chancellor must use the Budget to pull as many levers as possible in order to enable more finance to reach SMEs. One thing the Government can do is act to reduce the capital costs of lending to this sector for smaller specialist lenders. The initiative announced last week by the British Business Bank to extend its ENABLE Guarantee to house building by striking a deal with United Trust Bank is welcome. This type of Government action, because it pushes down the capital costs of lending to SME builders, will allow lenders to do much more of this. The Chancellor needs to back this initiative, encourage its expansion and explore all other options to reduce the risk and costs to banks of lending into this sector. If the Government wants to meet the ambitious housing targets it has set itself, it will need to ensure the long-constrained SME housing sector can once again access the finance it needs to meet the challenge of tackling Britain’s housing crisis.”

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Small construction firms crying out for lifelines

Responding to the fall in the Construction Purchasing Mangers’ Index (PMI) to 48.1 in September, the first drop below the 50.0 no-change threshold in 13 months, Mike Cherry, Federation of Small Businesses (FSB) National Chairman, said:

“Policy-makers have serious questions to answer about the decline in construction output highlighted by today’s PMI. Our latest research shows that changes to tax reliefs, levies and employer obligations have caused costs for small firms in the construction sector to rise at a faster rate than in any other industry. These policy-linked costs have increased by 34 per cent for construction firms compared to a cumulative CPI figure of 7.7 per cent for the five years to 2016.

“Being a labour-intensive industry, changes to minimum wage rates, pension auto-enrolment and increasing employer National Insurance Contributions have all had their part to play. We’ve heard those in power talk for years about the need to tackle the housing crisis. Yet they’ve simultaneously heaped additional costs on the very business owners who can help increase our supply of homes.

“Confidence among small construction firms has plummeted over the last year. Businesses across the sector will be looking to the Communities Secretary’s speech later this week, as well as the Autumn Budget, for urgently needed lifelines in an uncertain climate characterised by year on year increases in operating costs.”

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SME’s central to May’s house-building vision

In their election manifesto, the Conservative Party has pledged to 500,000 extra homes by 2022, as well as reaffirming their previous 2015 commitment to deliver a million homes by the end of 2020. As part of this, Theresa May must put SME house builders at the heart of her ambitious plans for housing, according to the Federation of Master Builders (FMB).

In response to last week’s release of the Conservative Party’s manifesto, Sarah McMonagle, Director of External Affairs at the FMB, said “The importance of addressing the country’s chronic shortage of homes is as great as ever, and the Conservative Party’s manifesto seems to appreciate the scale of the challenge ahead of us. A revised house building target of 1.5 million homes from 2015 to 2022 ups the ante on housing delivery again, but these ambitions can only be delivered with an accompanying focus on creating a more diverse and innovative house building sector. The decline in the number and output of smaller local house builders over the past few decades has led to the industry’s capacity haemorrhaging. To deliver the PM’s vision we will need to reverse this. The Manifesto’s explicit pledge to diversify the delivery of new homes is therefore extremely welcome. Key to doing this will be being able to build on some of the sensible reforms outlined in the recent Housing White Paper, which we hope to see implemented.”

“The Conservative Party’s manifesto sets out an ambition not only to build more, but to build better. There is a welcome emphasis on balancing the pressure for increasing the delivery of new properties with the need to deliver those homes to a high standard. As is widely recognised, smaller scale house builders have a strong focus on quality. By supporting greater diversity in terms of the companies building our new homes, a Conservative Government would be killing two birds with one stone. This is a vision that SMEs can build on.”

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Small UK construction firms waiting nearly two months for repayment from property giants

The UK’s 20 largest property developers now take 56 days on average to pay sub-contractors, up from 54 days last year, resulting in severe cash flow problems for smaller construction companies, says Funding Options, the UK’s leading online alternative business finance matchmaker.

Construction sub-contractors are facing growing cash flow problems — average time taken by the 20 largest UK construction firms to pay their suppliers.

graph_construction_subcontractors_facing_cash_flow_problems.771a84ffee87

Funding Options says that the failure of major developers to pay invoices in good time is damaging their sub-contractors’ growth prospects and in some cases threatening their viability. Without swift payment of their invoices, small companies such as bricklayers and carpenters cannot budget effectively and face severe funding issues.

These problems are being exacerbated by a slowdown in the construction industry since the second quarter of 2015.

The delays are jeopardising the ability of smaller construction companies to pay wages on time and bid for future work. The claim that big developers are sitting on the money owed to contractors is supported by the fact that large developers are paid by their own customers in 39 days. This is more than two weeks faster than they pay sub-contractors.

The study by Funding Options shows payment delays have been increasing since 2014, when it was taking developers 48 days to pay their suppliers such as electricians and plumbers.

It adds that with the Government setting a challenging target of one million new homes to be completed by 2020, it is more important than ever that payment delays in the construction sector are tackled as soon as possible.

Conrad Ford, CEO of Funding Options, says: “Smaller sub-contractors face the risk of bankruptcy if they are not paid within a reasonable amount of time.”

“Increasing numbers of small construction firms need help to cover those gaps in their cash flow.

“Major developers feel they have a lot to gain from delaying payments, knowing that their sub-contractors would be hesitant to raise their issues for fear of losing out on future work. There seems to be only two choices for the suppliers: accept these slow payments or lose the business going forward.

“These kinds of problems also won’t help the Government in hitting the very demanding targets it has set for new home completions.

Funding Options says that, technically, businesses are permitted to charge interest and other additional costs if their payment agreements are breached. However, smaller businesses rarely impose these charges as they need to avoid upsetting the companies they rely on for future business.

Conrad Ford says: “There are a few ways to allow firms to cover the gaps in their balance sheets. One of these options is bridging loans, which help them to accept new contracts, and be forward looking instead of dwelling on work they’ve already done.

“Funding Options puts smaller companies like sub-contractors in touch with suitable lenders, allowing them to plan ahead confidently and getting rid of doubts about whether they’ll have the costs to carry work out.”

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