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A negative insolvency outlook for another difficult year – that is what the UK construction industry will have to contend with, according to the Atradius Construction Market Monitor.
Atradius said delays in payments, as well as insolvencies, are expected to weigh heavily on the sector given a host of concerns led by what the trade credit insurer described as “overriding” economic uncertainty.
“The industry is suffering from persistent late payments, lack of supplier support, contract overruns, escalating costs, and retention payment issues,” noted the global insurance provider. “In addition, the knock-on effect of the Carillion liquidation will continue to impact suppliers and subcontractors for some time to come.”
According to Atradius, the average payment terms in the British construction industry measure 75 to 90 days. It also pointed to a high level of protracted payments and payment delays, adding that the trend is expected to have worsened in 2019.
The insurer’s advice to construction firms? Be forthcoming with financial information to enable robust risk management.
“With a high prevalence of late payments and insolvencies, it is impossible to deny that the construction sector is on shaky footings for 2019,” commented Simon Rockett, head of UK underwriting at Atradius. “Over the last 12 months, the speed at which some companies fail appears to have increased.
“Therefore, it has become even more important to have full, accurate, and up-to-date financial information to analyse the risks of trading with an individual company. Buyer transparency is essential to making the most-informed underwriting decisions.”
For the insurer’s part, Rockett highlighted that Atradius takes a proactive approach to information gathering that is supported by visits, meetings, and conference calls.
“Uncertainty does not create an ideal backdrop for trade; nevertheless, business cannot afford to stand still,” added the Atradius executive, referring to the limbo brought about by Brexit. “It is important to seize any opportunity to grow, but businesses must adapt to the more adverse risk climate and arm themselves with the right information, tools, and protection.
“Thorough research and maintaining real-time analysis on the customer, market, and wider sector form an essential pillar of any robust risk management strategy. Risk has always been an inherent part of trade and, therefore, businesses must evolve to manage these new risks in order to survive and thrive."
