Three quarters of construction SMEs say ‘cowboy clients’ are hampering their business, according to the latest research by the Federation of Master Builders (FMB).
Key results from the FMB’s UK-wide research into the impact of ‘cowboy clients’ – clients who delay or withhold payment without good reason or make completely unreasonable demands – on small and medium-sized (SME) construction firms include:
• Nearly three quarters think cowboy clients are a serious problem for their businesses;
• Nearly a quarter have had to wait for more than four months for payment from a client or large contractor;
• Fewer than one third are always paid within the standard 30 days.
The negative effects that late payment is having on construction SMEs include:
• 30% have had to delay payment to suppliers;
• 20% say late payment stopped them from having the confidence to grow their business;
• 16% had to borrow additional funds from a bank or other lender;
• 8% almost went out of business;
• 5% had to withhold wages and salaries from staff;
• 4% had to let staff go.
Sarah McMonagle, Director of External Affairs at the FMB, said: “There are so many horror stories of people being duped by cowboy builders. However, our research shows that there’s a flip side to this story with three quarters of small construction firms being hampered by cowboy clients. Typical cowboy client behaviour can include a demand for the builder to complete tasks not included in the original brief or quote and for no extra payment. The worst type of cowboy client seeks to delay or withhold payment on spurious grounds, for instance by discovering make-believe faults. Nearly a quarter of construction SMEs have had to wait for more than four months for payment from a client or large contractor. Fewer than one third of builders are always paid within the standard period of 30 days and this is completely unacceptable.”
McMonagle concluded: “Late payment is having a direct impact on the ability of construction SMEs to grow and prosper. One in five builders say delayed payments from clients have stopped them from having the confidence to grow their business. Worse still, nearly 10% say that they nearly went out of business because of this. As we edge towards Brexit, we need the construction sector to be firing on all cylinders to shore up the wider economy. The last thing we want to see is thousands of builders going to the wall because of their customers refusing to pay on time. We strongly recommend that builders and clients do everything they can to protect themselves by using a written contract that includes an agreed payment schedule. Clients rightly demand a high level of service from their builder but home owners also need to keep their end of the bargain by paying on time.”