UK renters facing contract renegotiation pressures
By Murray Pollok22 August 2013
There has been a significant increase in the number of customers trying to renegotiate equipment rental agreements over the past year in the UK according to a recent survey.
Almost half (47%) of the 111 rental companies surveyed by credit control specialist Creditsafe reported that customers tried to renegotiate their rental agreements in the last 12 months, up from 36% in the 2011-2012 period.
At the same time rental businesses are finding it more difficult to get paid, with 59% of firms experiencing an increase in late or defaulted payments over the past year.
David Knowles, business development director at Creditsafe, said: “The construction industry continues to face difficult trading challenges. Renegotiation of fixed contracts makes financial forecasting extremely difficult in a sector of the construction industry where profits are only generated by leasing firms in the medium to long term after making an extensive capital outlay and taking on significant financial risk."
Rental companies are also at risk from their customers going into receivership. Creditsafe found that in the last 12 months 65% of rental firms had lost money as a result of customers becoming insolvent.
Mr Knowles said the balance sheets of rental companies had taken “significant hits from the combined impact of late payments and customers entering insolvency.”
Creditsafe, launched in Norway in 1997 and now also with offices in the UK, Germany, France, Sweden, Ireland and the Netherlands, said it was critical that rental companies protected themselves from risk; “When dealing with customers who are on extended contracts, where monies are not paid up front, it is vital people continually check the ongoing financial health of customers.
“Companies can run into trouble extremely quickly, even if they filed healthy accounts in April they may find themselves in difficulties by June.”