SMEs being paid more promptly post-pandemic, study finds

More than half of small and medium-sized enterprises have experienced quicker payment times following improved protection mechanisms implemented during the pandemic.

Research conducted by the Chartered Institute of Building (CIOB) found that 52 per cent of 1,400 construction SMEs had seen an improvement in the time it takes to get paid by clients, with more than half saying they now receive payment within 40 days.

The research, which explored the lessons learned by the industry during the pandemic, also identified an improvement to hygiene facilities and mental health support since 2020.

While the CIOB described prompter payment times as a “positive step forward”, it said that more work was needed to further improve payment terms to within 30 days.

Poor payment practices are common in the industry, with many payments delayed well beyond the 60-day target set by government as part of the Prompt Payment Code, which was introduced in 2008.

During the pandemic, the code was overhauled to ensure that those signed up to the initiative paid small businesses within 30 days. The scheme remains voluntary, with just 3,500 signatories to the code. But the CIOB data suggests that the change had a positive effect on payments.

Paul Singh, commercial director at project and programme management consultancy EEDN, said: “The pandemic has definitely increased collaboration and empathy within the industry from clients to consultants and contractors, opening up dialogue and reducing the adversarial approach.

“We have also seen greater proactivity when it comes to invoicing and payments, with invoices often being settled before the payment period is up. There is undoubtedly still a lot of work to be done but the signs are certainly encouraging.”

A survey by the Federation of Master Builders in 2017 showed that, at the time, fewer than a third of construction SMEs were paid within 30 days and almost a quarter were waiting more than four months to receive payment from clients or large contractors.

The CIOB paper also found there to be greater take-up of staggered working hours during the pandemic, allowing people to work more flexibly on a project.

Meanwhile, it hailed the “greater collaboration” seen across the industry to create medical facilities to treat large numbers of COVID patients, citing the London Nightingale hospital – which was built in nine days – as an example.

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