Prompt payments hit 8-year low, construction firms suffer the most

Slow payments in the construction sector rose from 51.97 per cent in the second quarter to 56 per cent in the third. Construction has suffered more amid the Covid-19 pandemic because of project delays and an overall drop in demand for new buildings.
Slow payments in the construction sector rose from 51.97 per cent in the second quarter to 56 per cent in the third. Construction has suffered more amid the Covid-19 pandemic because of project delays and an overall drop in demand for new buildings. ST PHOTO: LIM YAOHUI

The ability of local companies to make timely payments has plunged to its lowest point in eight years.

Prompt payments accounted for just 38.39 per cent of total transactions in the third quarter - down from 40.09 per cent in the previous three months.

This is the lowest level since the second quarter of 2012, when on-time payments made up only 37.3 per cent of total transactions, noted the Singapore Commercial Credit Bureau (SCCB) yesterday.

Prompt payments on a year-on-year basis dropped more sharply - down 10.42 percentage points from the 48.81 per cent recorded in the same period last year.

D&B Singapore compiled the data from more than 1.6 million payment transactions of firms operating through the SCCB.

Slow payments dipped from 45.78 per cent in the second quarter to 44.16 per cent in the third quarter, but were up 6.87 percentage points from 37.29 per cent in the third quarter last year.

A prompt payment is when 90 per cent or more of total bills are paid within the agreed period. Slow payments occur when less than 50 per cent of total bills are settled on time.

Meanwhile, partial payments - when 50 to 70 per cent of total bills are paid on time - increased moderately to 17.45 per cent in the third quarter, from 14.13 per cent in the previous three months.

Around 75 per cent of industries saw an increase in delayed payments.

Delays within the construction sector jumped significantly, accounting for more than half of all total late payments.

Slow payments in the sector rose from 51.97 per cent in the second quarter to 56 per cent in the third quarter.

Construction has suffered more amid the Covid-19 pandemic because of project delays and an overall drop in demand for new buildings.

The Building and Construction Authority last month revised its projected construction demand to between $18 billion and $23 billion for the year, down from its January forecast of $28 billion to $33 billion.

Payment delays in manufacturing also rose, from 38.52 per cent in the second quarter to 39.55 per cent in the third quarter.

Conversely, the retail sector saw a marked improvement in payment delays compared with the previous quarter after the phase two reopening of businesses on June 19.

Slow payments fell by 8.92 percentage points to 42.3 per cent in the July to September quarter, from 51.22 per cent in the previous three months.

This was largely due to retailers of general merchandise, food and beverage as well apparel and accessories settling their accounts.

D&B Singapore chief executive Audrey Chia said: "Overall, the full impact of payment delays was more greatly felt in the third quarter compared with the previous quarter as businesses continue to face cash flow woes."

She said the construction sector in particular has seen a significant deterioration due to a series of delays in project completion.

"However, we have also seen an increase in partial payments being made by businesses over the previous quarter," she noted. "We would expect this trend of staggered payment plans to continue in the coming months."

A version of this article appeared in the print edition of The Straits Times on October 07, 2020, with the headline 'Prompt payments hit 8-year low, construction firms suffer the most'. Subscribe