£1.5bn late payment cost to Welsh firms

Media playback is unsupported on your device
Media captionFour local businesses have been left out of pocket by Johnson Construction's collapse

Businesses in Wales are owed an estimated £1.5bn in late payments, according to a credit firm.

It has left some firms struggling to make ends meet - with 70% across the UK saying in a survey they have faced payment problems in the last year.

The issue is being highlighted by four contractors in Powys who are owed £90,000 for work on a Co-op shop.

The firm behind the project in Machynlleth is in administration, leaving workers out of pocket.

Johnson Construction UK, based in Greater Manchester, is in administration after late payments issues began to emerge in February.

Despite being a profitable firm with annual sales of almost £17m, small contractors were forced to take Johnson Construction to court - with eight judgements awarded against it.

But when the four builders working on the Machynlleth Co-op store project threatened to halt work unless they were paid, they say they were put under pressure by Johnson Construction to finish the job.

Stuart Roberts, of SJ Joinery, worked on the shop's roof and is owed £10,000.

"We're only a small company and we've never dealt with anything like this before," he said.

"We're stuck at the moment and have nowhere to go."

The four contractors said Johnson Construction UK told them they would be in breach of contract if they did not finish the job - and would be forced to pay the bill to get the work done.

Image copyright Thinkstock

But the problems faced by the contractors is just the tip of the iceberg, according to Caerphilly-based analysts Creditsafe.

It has been examining the issue of late payments, which are usually defined as payments still outstanding more than 30 days after an invoice was sent out.

Creditsafe says it estimates the total bill for outstanding late payments to firms across Wales has now hit £1.5bn.

And according to the Forum of Private Business, a poll of 4,000 smaller firms in the UK found that 70% had a problem with late payments in the last year.

Perhaps it is no wonder then that Labour leader, Ed Miliband, told a business conference at the weekend that late payments were a "national scandal".

He added that a Labour government would pass a law to stop the "bullying" of smaller businesses by larger ones if it was required.

The coalition government says that the Small Business, Enterprise and Employment Bill, which is going through parliament, will allow the naming and shaming of late payers.

In the meantime, contractors like Stuart Roberts and the three other firms hit by Johnson Construction's demise in Machynlleth are left counting the cost.

They argue that the Co-operative, which prides itself on its ethical approach to business, should take some responsibility for the building work being completed but not paid for by the retailer's main contractor, Johnson Construction UK.

"The joint administrators will continue to discharge their statutory duties in recovering value in the best interest of all creditors," FRP Advisory, the administrators of Johnson Construction UK, said.

Co-operative Food said it was aware of and fully understood the concerns raised by the suppliers who were contracted by Johnson Construction and who have outstanding invoices.

"The construction company were responsible for paying its direct sub-contractors," said a spokesman.

"All payments owed to Johnson's have been made in accordance with our contract, but we are unable to comment further while the matter is in the hands of administrators."

A report by MPs this week criticised the insolvency system saying it offered too much protection to investors and not enough to workers and Bodies 'withholding cash from firms' contractors when things go wrong at a company.

Image caption The contractors want the Co-operative Group to intervene

More on this story

Related Internet links

The BBC is not responsible for the content of external Internet sites