- Insolvency rates rise despite construction sector growth, driven by delayed payments and poor cashflow management.
- ProjectPay urges systemic reforms, advocating for fintech solutions over physical expansion to stabilize businesses.
What happened: Cashflow woes outpace industry growth
Despite a surge in construction activity across key markets, insolvency rates among contractors and subcontractors continue to climb. ProjectPay, a fintech firm specializing in payment solutions for the construction sector, warns that the industry’s “building boom” is failing to address systemic cashflow issues.
According to their analysis, delayed payments, complex supply chains, and outdated financial practices have left small and medium-sized enterprises (SMEs) vulnerable, even as project pipelines expand.
The company highlights that 30% of construction firms face insolvency risks within 12 months due to payment delays, per a recent industry report. ProjectPay CEO Jane Doe emphasized, “Building more won’t solve broken payment cycles. We need digitized workflows and real-time financial tools to prevent collapse.”
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Why it’s important
The construction sector contributes $1.3 trillion annually to the global economy but remains plagued by fragmented payment systems. ProjectPay’s call for fintech adoption aligns with broader trends: automated invoicing and blockchain-based contracts could reduce payment delays by up to 50%, as noted in a 2023 McKinsey study.
Without addressing cashflow bottlenecks, SMEs—which comprise 80% of the industry—risk collapse, destabilizing supply chains and delaying critical infrastructure projects. As governments invest in construction to boost economies, integrating agile financial tools becomes urgent to ensure long-term viability.
