Belfast Telegraph

Bad debts mean murky outlook for traders

Two in five businesses here have no protection against non-payments

By Clare Weir

Just over half of businesses polled in a Northern Ireland survey have claimed that late payment of trade invoices could threaten their survival.

The latest Quarterly Economic Survey from Northern Ireland Chamber of Commerce and accountancy firm BDO polled almost 500 businesses across Northern Ireland, with 55% saying that late payment of trade is potentially threatening their growth and even survival prospects.

Another 6% said that late payment could actually inhibit their businesses' ability to continue trading.

The news came a day after Finance Minister Sammy Wilson unveiled a new scheme to protect sub-contractors on government building contracts.

The survey also revealed that almost two in every five firms here do not have a system in place to protect them from bad debt.

Just over 30% said that the level of bad debt in their business had increased over the last 12 months and one third of businesses said they believed that bad debts would pose an increased risk to the stability of their business over the coming year.

However, there is some light at the end of the tunnel for businesses in Northern Ireland, with 45% of businesses polled in the last three months of 2012 expecting to see an increase in turnover over the coming year, up from 42% in the third quarter of 2012.

One quarter (25%) believe that their turnover will decrease over the next 12 months. Those expecting to see an increase in profitability (38%) over the next year has increased since the previous quarter from 35%.

Just less than one third (31%) believed it would decrease which is up 1% point from the third quarter of 2012.

Chamber chief executive Ann McGregor said that while overall results for this quarter were encouraging, government must help educate businesses on managing late payment and bad debt.

"Businesses need to make sure they have suitable measures in place and work together with the Government to ensure late payments become less endemic across the supply chain," she said.

"Cashflow has been a problem for many businesses since 2008, when the downturn led to many firms being unable to access working capital.

"Measures such as a kitemark for prompt payers, alongside moves to encourage local government to use e-invoicing, could mean fewer businesses struggling with cashflow problems."

Brian Murphy, restructuring partner at BDO, added: "Despite the challenges in the market place, these business confidence indicators are perhaps grounds for cautious optimism.

"However, similar improvements have not been reflected across all indicators and the result highlighting a weakening of export orders is a particular worry.

"It is vital that everything is done to support Northern Ireland's business growth."

... but is Sammy man with plan to save subbies?

By Margaret Canning

Finance Minister Sammy Wilson has said he is "determined" to address the problems of poor payment practices in the building trade after attracting criticism over a new policy of project bank accounts.

Mr Wilson has said the accounts will be used for construction contracts worth over £1m awarded by the Central Procurement Directorate (CPD) and which involved "a significant subcontracting element".

The intervention follows the demise late last year of Ballymena-based Patton Group, which went into administration owing £63m to suppliers, banks and 'subbies'.

The Construction Employers Federation said it was keen to improve payment practices in the construction industry.

Managing director John Armstrong said major contractors who failed to pay up gained an "unfair advantage" over competitors who did pay promptly.

"We are working to help main contractors who pay promptly to compete on a fair basis and we are working to help protect our subcontracting members."

He said the construction industry had agreed with CPD that project bank accounts should be piloted to assess how well they would work.

But Mr Armstrong said: "As of December 2012 CPD had not identified a pilot project. We are somewhat surprised by the Minister's announcement that as of yesterday all CPD contracts over £1m will use a project bank account."

He said CEF had "concerns" that CPD staff and the industry would not be "geared up" to manage contracts which used project bank accounts. "We understand that in Great Britain project bank accounts have been primarily used on larger contracts," Mr Armstrong added.

But Mr Wilson said: "SMEs in the construction sector are badly impacted by poor payment practices and I am determined to address this.

"Slow payment and poor cash-flow are endemic in the construction industry supply chain. Project bank accounts will lead to a more balanced trading environment."

He said the CPD was ready to work with the industry to ensure the plan worked before it was applied in the public sector.

On Monday, Mr Wilson said: "We have had an increasing number of complaints around the Patton Group story of major contractors who were undertaking public sector works, getting money from public sector departments and then not paying sub-contractors on time and sometimes not at all."