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Construction cashflow crisis warning

30 August 2017

Current cashflow issues within the construction sector have been described as "unsustainable" by the Specialist Engineering Contractors' (SEC) Group.

Problems highlighted by the SEC Group include "late and lengthy" payment times, lack of access to reasonably-priced lines of credit, along with recent rising prices of equipment and materials.

Small companies are increasingly relying on their directors for funding as a result, says the SEC Group.

It quoted figures from Funding Options which showed that construction directors lent their firms £29.7m in the 2013/14 financial year, rising to £38m in 2015/16.

SEC Group chief executive officer Professor Rudi Klein described the figures as "extremely worrying" and said the "cashflow position in the industry is now critical".

Further reference was made to the poor financial results of the UK's large construction firms, with the example of Carillion used to emphasise this.

Professor Klein said: "These companies are taking longer and longer to pay their supply chains with SMEs having to spend the bulk of their contract values up front before receiving payment."

SEC Group is pressing the government to mandate the use of project bank accounts across public sector construction, ring-fence cash retentions and mandate 30 day payment times.

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