Insolvency specialist Begbies Traynor claims that there has been a 10% increase in the number of construction companies in financial distress over the past year.
According to Begbies Traynor’s analysis, the number of companies involved in the development of building projects in significant financial distress reached 13,018 in the first quarter of 2019, up from 11,813 in the first quarter of 2018.
This trend has also affected other construction sub-sectors: for those companies involved in the construction of commercial buildings there has been a 5% increase in the number in significant financial distress, reaching 2,451 in Q1 2019, up from 2,328 a year before.
Despite solid house-building activity, Begbies Traynor says that there has also been a 5% increase in the number of distressed companies involved in the construction of domestic buildings, rising to 6,209 in the first quarter of 2019 up from 5,919 a year before.
Overall, there are 484,000 UK businesses described as being in significant financial distress by Begbies Traynor, which is 16% of all UK businesses, or about one in six.
Begbies Traynor partner Julie Palmer said: “Many UK businesses are currently in limbo and deferring major investment decisions. This combined with consumers holding back on big ticket purchases has resulted in increasing significant distress across many sectors.
“This trend is reflected in our latest Red Flag research which clearly shows that capital intensive sectors – such as construction and property – are suffering as both business and consumers have taken a cautious approach and limited their exposure. This is bad news for the economy as construction accounts for 17% of all UK businesses, employs almost 2.5m people and contributes 6% of the UK economic output.
“Worryingly this data shows that this economic malaise is spreading to the UK’s dominant services sector and does need to be stopped in its tracks by a combination of political certainty and a commitment to support UK business, particularly SME’s which are the “engine room” of the UK economy.”
Article Courtesy of the Construction Index.