The government has been warned that the post-Brexit environment could create the “perfect storm” for SMEs in the construction industry, by The Specialist Engineering Contractors’ (SEC) Group.
SEC, which represents the largest sector in UK construction, has cited that late or non-payments, along with hikes in material costs will await construction SMEs post Brexit. Also, there’s the reverse charge VAT, which has been delayed for a year, but will still be coming into effect on 1st October 2020, this will likely reduce cashflow to SMEs too.
The Group has written to the Secretary of State for the Department for Business, Energy and Industrial Strategy (BEIS) and new construction minister, in regards to prioritising any action on fair payment for construction SMEs. SEC wants to ensure there is continuity in taking forward measures to improve payment security in the sector, and measures are put in place to stop poor payment practices.
Kelly Tolhurst, the current small business minister, and Andrew Stephenson, the construction minister, were very keen to resolve the impasse on retentions, the SEC says. Tolhurst asserted that the government would take action if the industry failed to come to a consensus on a way forward, during a Commons debate in June.
Insolvency numbers in the construction industry have reached around three thousand according to SEC, which is higher than any other sector of the UK economy. This figure is predicted to increase even more this year, as SEC highlights the continuance of widespread payment abuse in the sector.
The SEC group insists that the government needs to introduce legislation to mandate the use of project bank accounts and to protect cash retentions. It believes that this will have the biggest impact when it comes to improving the outlook for the vast majority of SMEs in the construction sector.
Help for construction sector SMEs
If you’re the director of an SME operating in the construction sector, or any struggling industry that is, it’s absolutely essential that you seek out professional advice at the first sign of financial troubles.
Unfortunately, construction sector companies are a lot more vulnerable to cash flow problems and insolvency when compared to other sectors. But getting professional help sooner rather than later can give you more options, and help you get on the right path towards recovery.
At Clarke Bell, we provide services for construction companies, including a Creditors’ Voluntary Liquidation (CVL) from just £1,995 (all inclusive).