Why your subcontractors are running out of cash (and what it's about to cost you)

March 20, 2026

When a subcontractor goes under mid-project, the bill rarely stays with them. It transfers up the chain — to the main contractor, to the developer, and to the programme as a whole. Remobilising a specialist subcontractor in a tight labour market can take weeks. The associated overrun, acceleration costs, and potential delay damages routinely dwarf the original payment that was withheld.

This is not a hypothetical risk. Construction accounts for 17.7% of all business insolvencies in England and Wales — more than any other sector. The average invoice payment term across UK construction is now 54.1 days, a five-year high. In practice, many subcontractors — especially specialists and smaller firms — report waiting 90 to 120 days. That is a three-to-four month working capital gap that small businesses are expected to self-finance, often at the same time as mobilising on their next project.

The downstream consequences for main contractors and developers are consistently underestimated at the tendering stage. The costs of a supply chain insolvency include replacement procurement at a premium, programme delay that may trigger liquidated damages, legal costs to untangle the failed contract, and reputational damage with supply chain partners who observe how the company treats the firms it relies on.

There is also a growing regulatory dimension. The Building Safety Act places explicit responsibility on those who commission and manage construction to document their supply chain. A developer or main contractor who cannot demonstrate that subcontractors were paid fairly and on time will find this increasingly difficult to defend in procurement and regulatory settings — particularly on public sector frameworks.

The good news is that faster payment does not necessarily mean worse cash flow for the payer. Supply chain finance solutions — where a finance provider pays the subcontractor early and the main contractor repays on a longer term — have matured significantly. For a main contractor, the economics can be compelling: strengthen your supply chain, reduce insolvency risk, and potentially negotiate better pricing from subcontractors who value prompt payment — without materially affecting your own cash position.

The prerequisite for any supply chain finance solution is a clean, agreed, compliant payment record. An application that is disputed, undocumented, or procedurally non-compliant cannot be financed efficiently. Investment in a clean payment process is, in this respect, also investment in access to working capital tools.

The CAPS approach

CAPS connects a compliant payment workflow directly to third-party supply chain finance providers. Once an interim payment obligation is agreed on the platform, it can be presented for early payment — without the main contractor assuming additional financial risk. Faster payment to subs. Healthier supply chain. Cleaner audit trail.

→ Interested in how supply chain finance integrates with your payment workflow? Get in touch.