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  • Writer's pictureGraham Rawlings

The issue of late payments worsens.

The construction industry is facing a growing problem with late payments, and the situation is getting worse. This issue can significantly impact the financial health of contractors and subcontractors, disrupting cash flow and making it difficult to manage finances.

One of the main reasons for the increase in late payments is the current economic climate. The COVID-19 pandemic has severely impacted the economy, leading to financial difficulties for many businesses, including clients in the construction industry. This has resulted in delays in payments and an increased risk of non-payment.

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Another contributing factor is the increased use of "pay when paid" clauses in contracts. These clauses state that payment to the contractor or subcontractor is dependent on the client receiving payment from their customer. This can lead to delays in payments and a lack of control over when they will be paid for contractors and subcontractors.

The problem is further exacerbated by the lack of clear payment terms in contracts, making it difficult for contractors and subcontractors to know when they will be paid and to hold clients accountable for delays.

The practice of "retention" is also a significant problem. It is the practice of withholding a percentage of the contract sum until the final stages of the contract or even after practical completion; this can delay the payment by contractors and subcontractors for months or even years and affects the project's cash flow.

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The situation is dire, affecting the financial health of contractors and subcontractors and the entire construction industry. To address this issue, all parties must work together to find solutions and ensure timely payments. This includes clear communication, formal contract language, and financial tools to manage cash flow.

The construction industry is a vital part of the economy, and we must find a way to mitigate the problem of late payments. Without action, the construction industry will continue to suffer, and the situation will only worsen.


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