Only one in four construction SMEs paid their debts on time in Q4 2018: report

Weak activity was attributed to lower than anticipated construction demand for both the private and public sectors.

Only 25% of construction debt were paid on time in Q4 2019 across small and medium-sized enterprises (SMEs) in Singapore, according to a report by Experian’s DP Information Group (DP Info).

The report, which analysed the payment patterns of over 120,000 companies in Singapore across retail, wholesale, construction, hospitality, information and communications, manufacturing, services and transport, found that the construction sector was the hardest hit with a significant increase in days turned cash (DTC) delinquent payments.

Whilst most sectors witnessed a modest increase in DTC of approximately two days, the construction sector registered a QoQ DTC increase of 18 days. This was the key contributor to the overall lengthening of payment settlement timelines amongst Singapore SMEs and represented the highest DTC for the construction sector in the last five years, DP Info explained.

The overall DTC national average saw a QoQ increase from 33 to 40 days, which indicated a lengthening of payment settlement timelines for SMEs in Singapore.

“Activity within the construction sector has been weak in recent years, largely attributed to lower than anticipated construction demand for both the private and public sectors,” the firm highlighted in a statement. “However, 2018 saw an upturn of 23% in construction demand. This was mainly driven by Government-led public sector projects, with the Building and Construction Authority (BCA) expecting this sustained public sector demand to continue into 2019.”

According to the firm, smaller local companies are still expected to face challenges as many infrastructure projects are being assigned to larger companies. The impact of smaller profit margins from these smaller firms may have led to the rise in delinquent payments amongst construction companies.

“SMEs will potentially face bigger challenges in 2019 as uncertainties in the business environment are expected to persist, leading to the management of cash flow, liquidity, and credit risk remaining as top business concerns,” James Gothard, general manager for Credit Services & Strategy SEA of Experian, said.

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