The Construction Payment Chain - Why Subbies Wait Months to Get Paid
The construction payment chain runs from client to main contractor to tier 1 subcontractor to tier 2 subcontractor to materials supplier. Each link adds 30 or more days to the payment cycle, meaning a tier 2 subcontractor can wait 90-120 days after completing work. The Construction Act provides some protection (payment notices, adjudication rights) but in practice most subbies use invoice factoring to bridge the gap. More detail + scope
This page covers
How the construction payment chain works, legal protections, and how subcontractors manage cash flow
Not covered here
Construction industry invoice finance (see /industries/construction/), provider reviews (see /providers/)
In construction, every layer of the payment chain can add another 14 to 30 days. A tier 2 subcontractor who finishes work today might not see full payment for 60 to 120 days, and that is before retention is factored in. It is one of the main reasons construction businesses fail, and it is why invoice factoring is common among UK subcontractors.
How the Chain Works
Retention Makes It Worse
On top of the payment delays, most construction contracts hold back 5% retention - half until practical completion, half until the end of the defects liability period (typically 12 months). On a £200,000 subcontract, that is £10,000 sitting with the main contractor for a year or more. Many subbies never recover their retention because the main contractor goes bust first.
Construction Act Protections
The Construction Act gives subcontractors the right to payment notices (so you know what you are being paid and when), the right to suspend work for non-payment, and access to adjudication (a fast-track dispute resolution process). These are important legal protections but they do not actually speed up payment - they just give you tools to fight back when payment terms are abused.
Why Factoring Is Standard for Subbies
Invoice factoring typically advances 70-85% of an approved application for payment, often within 24-48 hours. For a subcontractor waiting 90 days, this is the difference between survival and insolvency. Construction factoring providers understand applications, valuations, retention and CIS deductions. They factor against certified applications, not just final invoices, which means you can get funded earlier in the payment cycle.
Founder & Managing Director, Muswell Rose, founder and PSC of Best Business Loans Ltd
Adam is the founder and managing director of Muswell Rose and a founder of Best Business Loans Ltd, the company behind Market Invoice. He spent over three years as managing director of Penny, a UK invoice finance business, and his career runs through insurance, mortgages, commercial finance and fintech lending. He writes the Market Invoice library.
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