With insolvencies on the rise in the construction industry, subcontractors are seeing their credit ratings being downgraded.
In its latest product availability statement, the Construction Leadership Council says that while there is now good availability to building products and materials, similar to pre-pandemic levels, new supply chain problems have emerged.
“In line with the slowing market, brick, block and roof tile manufacturers are balancing ‘just-in-time’ production levels and stock on the ground as storage is now proving challenging, the CLC product availability group (PAG) says. “They are, however, keeping a careful eye on indicators to rebuild stocks when required. Investing in flexible and agile capacity should help to counter any sudden surprise peaks in demand.
“Members of the PAG panel highlighted growing problems of cash flow and liquidity. Everyone in the industry, from clients through contractors and the materials supply chain has a role in addressing this. For example, hardening payment behaviours between Tier 1,2,3 and 4 contractors are only adding to market pressures, especially on smaller firms. Builders’ merchants, who provide a financial bridge between manufacturers and contractors, are experiencing slower payments from customers and more bad debts.
“PAG members are also aware that some companies in the sector have experienced credit rating downgrades which are impacting credit limits and putting additional pressure on those businesses and the wider industry. Subcontractors complain that they cannot get credit insurance because of the negative assessment of their credit worthiness. With the rate of insolvencies and administrations in construction continuing to rise, an expanded access to insurance is an area that all construction sectors need to address.”