Insolvency Stats Give Construction Industry Foundations To Build On

The construction industry is showing signs of building itself back up again, says CVR Global’s construction insolvency expert Jason Maloney, who has revealed why he thinks the upcoming Budget will provide the shot in the arm that contractors and sub-contractors need.

The latest Company Insolvency Statistics from the Insolvency Service offer a glimmer of hope for the UK construction industry that has been operating under dark clouds for a number of years now.

The number of construction companies entering insolvency between October 2019 and December 2019 was 748, which is the third consecutive quarter-on-quarter reduction.

This should not take away from the fact that these figures are alarmingly high – as the construction industry still accounts for 18 per cent of all UK company insolvencies; making it the largest sector for business failures.

One of the key reasons for this is that it is an industry where companies are heavily reliant on one another due to the contractor and sub-contractor relationship – if a contractor enters difficulty or loses a contract, then it is likely other suppliers below it will follow suit.

We also have to bear in mind that, surprisingly, the triple quarter-on-quarter reduction in insolvencies also came at a time when uncertainty was at its peak economically and politically with Brexit, suggesting that the construction industry is beginning to stabilise.

Now we have a majority government and the UK has left the EU and there is less uncertainty, this could well give rise to a further recovery for the construction industry when we review the following quarter’s insolvency figures.

While a lot of business’ eyes will be on the outcome of the UK’s trade negotiations with the EU, I firmly believe that any announcement on infrastructure spending regarding HS2 and in the Budget on March 11 will be key to injecting some longer-term impetus into the construction sector.

The fact that the chancellor, Sajid Javid, announced the date of the budget from a construction site will give the sector some added hope that funds will be made available to press ahead with a variety of projects, whether it is to do with transport, offices, or new homes that contractors and sub-contractors can generate work from.

Construction companies, or in fact any business, that is operating on thin margins should consult an experienced financial professional to ensure that they are well protected in case their income suddenly drops.

For impartial insolvency and restructuring advice relating to the construction industry, contact Jason Maloney via JMaloney@cvr.global