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Jump in builders’ merchants going ‘nuclear’ over unpaid bills

Mounting tension in the supplychain has spurred a four-fold hike in the number of winding-up petitions issued against builders and civils contractors.

According to figures collated by accountant Mazars, leading builders’ merchants applied to the courts to wind up 185 construction firms during 2022/23 compared to just 44 petitions in the prior year.

Sharp increases to the prices of many building materials pushed many construction firms into distress leaving them struggling to pay their bills.

But with insolvency rates already on the rise, suppliers and builders merchants may also be more readily turning to the courts in an effort to recover unpaid bills before they turn into bad debts.

The prices of many key building materials have risen sharply in the past year, including the prices of cement (25%), ready-mixed concrete (18%) and insulating materials (41%).

Mazars said that the construction sector saw 4,135 businesses go insolvent in the 12 months to the end of January 2023, a rise of 49% on the 2,776 businesses that went under in the previous year.

Patrick Lannagan, Partner at Mazars, said: “Builders’ merchants are being forced to take more aggressive action on unpaid bills and that’s troubling news for the construction sector.”

“Rising interest rates are causing problems across the real estate sector and that is spreading to the construction industry – which has its own problems dealing with a worrying level of inflation for the sector’s raw materials.”

“This is a sign that the financial pressures on the building industry are starting to rise sharply.

“Raw materials, energy, borrowing, labour – it’s all become more expensive. Add that to the long-term problem of late payment and the financial stress is enormous.”