UK Construction Late Payment Statistics 2026

Why is late payment such a severe problem in UK construction compared with other sectors?

Construction projects involve long chains of contractors, subcontractors and suppliers. Payment typically flows from the end client down through each tier. At each stage, there is an incentive for the party in the stronger position to delay payment. Materials and labour costs are incurred upfront, but invoices may not be raised until a project milestone is reached and may then sit unpaid for 60 days or more.

Unlike retail or professional services, construction businesses have limited ability to stop work mid-project without penalty, which reduces their leverage when chasing overdue invoices.

Can construction businesses use invoice finance given that their invoices are often disputed or subject to retention clauses?

Yes, though some conditions apply. Invoice finance providers experienced in construction will typically advance funds against undisputed, approved invoices. Retention amounts, which are sums withheld by the main contractor until practical completion, are generally excluded from the facility until they are due and payable.

Some specialist providers do offer retention finance as a separate product. It is important to disclose the nature of your invoices and any conditions attached when discussing terms with a provider.

What is the statutory interest rate a UK construction business can charge on an overdue invoice?

Under the Late Payment of Commercial Debts (Interest) Act 1998, businesses can charge statutory interest at 8 percentage points above the Bank of England base rate. With the base rate at 3.75%, that gives a statutory rate of 11.75% a year on the outstanding debt. Businesses can also claim fixed debt recovery costs of between £40 and £100 depending on the value of the invoice. In practice, many SMEs do not enforce this right for fear of damaging client relationships.

How does the Prompt Payment Code affect large contractors' obligations to their construction supply chain?

Signatories to the Prompt Payment Code, overseen by the Small Business Commissioner, commit to paying 95 per cent of undisputed invoices within 60 days and to working toward 30-day terms. For public sector supply chains, the government's prompt payment policy requires a 30-day payment term in public contracts and in subcontracts that substantially contribute to them. However, code membership is voluntary for private sector businesses, and enforcement relies primarily on reputational pressure and the Commissioner's reporting powers rather than direct financial penalties.

Is invoice discounting or factoring more common in UK construction, and what is the practical difference?

Both products are used in construction, but confidential invoice discounting tends to be preferred by more established firms because the business retains control of its own credit control and collections process. The client never knows a finance facility is in place.

Factoring, where the provider manages collections directly, is more common among smaller or newer construction businesses that lack the internal credit control resource to chase large main contractors effectively. Either product advances a percentage of the invoice value, up to 90 per cent for several providers, releasing cash within 24 to 48 hours of invoice submission.