Three-quarters of UK SMEs are unsure they can pay their bills next month, and construction businesses are seeking help more than any other sector. Business directors urgently need to understand their finances, their duties, and where to turn for support, writes Jonathan Cooper, founder and director of The Director’s Helpline.
Three in four UK SMEs say they don’t know whether they’ll be able to pay their bills next month. That single figure, from new survey data we’ve gathered at The Director’s Helpline, should give every construction business owner pause. Not because construction is uniquely exposed to a difficult economy, but because the data points to the construction industry making high-stakes decisions without a clear picture of its own financial position.
The findings come from our Business Health Check, a free diagnostic tool we built for SME directors and sole traders to assess the true state of their business. Of the 403 respondents, 80% said their company is still trading. But ‘still trading’ and ‘stable’ are not the same thing.
Only 24% felt confident they could cover the basics – rent, payroll, supplier invoices – over the coming weeks. More than a third expect to miss payments altogether, and a further 32% described meeting costs as “tight”. This is an economy of businesses surviving month to month, not one operating with any real margin for error.
Construction is where the pressure is showing up most
Our lead data shows construction and property generating the highest volume of enquiries of any sector so far this year, well ahead of every other industry we track.
That gap matters. It tells us construction directors are reaching out for support more than their counterparts in almost any other part of the SME economy. I set up The Director’s Helpline because too many business owners were being forced to make high-stakes decisions without clear guidance on their options, and what we’re seeing now is a familiar combination of pressures facing construction firms – specifically rising costs, volatile demand and tax arrears colliding all at once. Anyone who has run a contracting business will recognise why construction is so exposed to exactly that mix.
Construction faces many challenges from numerous angles. Margins in construction have been notoriously thin for a number of years now, and contracts are frequently agreed months before the work itself is priced into the supply chain, leaving little room to absorb sudden material or labour cost increases. Planning and regulatory bottlenecks can also mean projects take longer than planned to move into the construction stage. Payment terms can stretch long after work is completed, with retentions held back by main contractors and cash tied up at multiple points down a subcontracting chain. Add in the seasonal nature of much site work, and the timing mismatch between money going out and money coming in, and it becomes a structural feature of the industry rather than an occasional inconvenience.
The Construction sector is heavily dependent on finance, too. Even though interest rates have eased from their peak, borrowing costs remain relatively high compared with the ultra-low-rate era. This, among wider economic factors, has reduced demand for new housing, commercial developments, and private investment projects. Residential construction has been hit particularly hard as affordability remains a challenge for homebuyers. Within the sector, there continues to be a shortage of skilled workers. Paired with an ageing workforce and insufficient recruitment of new entrants, labour costs remain notably high.
The wider survey data brings this into sharper focus. Debt is now the norm rather than the exception, with 78% of respondents carrying outstanding liabilities, 57% owing more than £25,000 and 39% owing more than £50,000. More than half have unpaid HMRC liabilities, whether VAT, PAYE or CIS deductions – arrears that tend to build quietly and then arrive all at once. For construction firms juggling retentions, supplier credit and subcontractor payments simultaneously, it’s not hard to see how these figures stack up so quickly.
The human cost is just as significant
What the data also captures, and what often gets lost in conversations about cash flow, is the toll this takes on the people running these businesses. Nearly two-thirds of respondents told us they feel stressed, overwhelmed or close to burnout, and only 31% feel confident making key decisions in the current climate. More than half said they feel they are running their business alone, without anyone to turn to for guidance.
This will resonate with many in construction, where a large proportion of directors built their businesses on trade expertise rather than financial training. Being excellent at delivering projects doesn’t automatically translate into confidence reading a cash flow forecast or recognising the early signs of insolvency. That gap between operational skill and financial literacy is precisely where businesses become vulnerable – not because directors aren’t capable, but because no one ever required them to be financially literate in order to start trading.
Why directors can’t treat financial visibility as optional
This is where the legal reality becomes important, not just the commercial one. Company directors carry duties under the Companies Act 2006 and the Insolvency Act 1986 that shift the moment a business is, or is likely to become, insolvent. At that point, a director’s primary obligation moves from shareholders towards creditors, and continuing to trade without a reasonable prospect of avoiding insolvent liquidation can expose a director to personal liability through wrongful trading claims. None of that is possible to assess accurately without an honest, up-to-date view of the numbers.
This is why structured data collection matters. Most small and medium-sized construction businesses don’t have a finance function pulling together real-time visibility of cash position, aged debt and looming tax liabilities in one place. The Business Health check tool can turn a vague sense that ‘things are tight’ into specific, actionable information: what’s owed, who is it owed to, when does it need to be paid, and what’s coming in to cover it.
Enabling directors to clarify these things does two things. It helps directors spot warning signs while there’s still time to act, rather than after a crisis has already taken hold. And it gives whoever a director ultimately speaks to a clear, factual starting point so that the advice they give can be tailored to the director’s actual position, rather than generic guidance that doesn’t fit their business.
There’s a broader value to this data too. Aggregated, anonymised data of this kind shows where pressure is genuinely concentrated across the economy, rather than relying on anecdotal evidence.
The lesson for construction directors is straightforward, even if it’s not always comfortable. Treat a financial health check with the same seriousness as a site safety audit, and if the numbers raise concerns, speak to a trusted advisor while there’s still a genuine choice of paths forward.
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