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Construction companies on the brink

news

16th May 2018

The number of British construction companies in financial distress has increased by a quarter in the past year and has doubled in the past 18 months.

The picture is even worse for those in the support services sector, with a significant 40% rise in the number of financial distress.

A worrying 60,541 construction companies and 115,249 support service companies are in ‘significant risk of insolvency’ according to Begbies Traynor’s Red Flag Alert search for Q1 2018.

In october 2016, there was a red flag alert against only 29,000 construction companies.

Julie Palmer, Begbies Traynor regional managing partner, said: "While uncertainty around the outcome of the Brexit negotiations has undoubtedly had an impact on business confidence across the UK, the economy has also faced a wide range of unexpected headwinds which have dampened progress over the past year.

"Currency fluctuations, rising interest rates, subdued consumer spending and a cooling property market are just some of the factors that have combined with growing political uncertainty to push nearly half a million UK businesses into financial distress over the past 12 months."

Chairman Ric Traynor, claimed: "Although the UK economy is still growing, it is now starting to lag behind many other G20 members, with predicted GDP growth during 2018 of around 1.7%. The latest Red Flag figures reflect this slowdown with increased financial distress being felt across every sector and region of the UK.”

"The UK Construction sector last month suffered its biggest drop in activity since the 2016 Referendum vote, as Brexit concerns and the fallout from Carillion's collapse caused further delays in large infrastructure and construction projects.”

He added: "While the recent recovery in sterling should put UK businesses who import raw materials into a stronger trading position, the biggest positive impact on business confidence is likely to come when we finally receive clarity over how our eventual exit from the EU will look.

"In the short term however, the most pressing issue is whether or not the Bank of England decides to raise interest rates next month. If they do, it could push many struggling businesses, particularly those with high levels of debt, into formal insolvency."

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