Construction failures rise by nearly 80%

The number of failures of UK construction companies has increased by nearly 80% year on year, with recent casualties including mechanical and electrical firm George Birchall and Cuddy Demolition and Dismantling.

The Creditsafe Watchdog report found that there were 943 failures in the sector during Q3 2018, compared to 527 in the same period a year ago.

Meanwhile the number of companies falling into administration grew by 6.2% quarter on quarter, with 888 recorded in the previous quarter.

The level of bad debt owed by the sector to suppliers increased by 27.2% to £63.9m between quarters, while the total level of debt owed to the sector increased by 11.3% to £10.7m over the same period.

And the number of County Court Judgments (CCJs) recorded in the last quarter, which indicate whether companies are struggling to pay bills, increased by 38.1% year-on-year from 2,424 to 3,347, although the average CCJ value dropped by 12.5% to £4,092.

However, the Creditsafe Watchdog report did note some positive news, including a 40.4% increase in the number of employees in the sector when comparing Q3 2018 to Q3 2017, with the total now standing at 1.4m. The number of active companies operating in the industry rose to 419,410, an increase of 11.5% over the same three-month period a year ago.

Total sales accumulated by the construction sector fell by 1.7% year-on-year to £301bn, despite a 1.6% increase between quarters. The number of new companies decreased by 4.4% between quarters to 16,150, although the figures represent a jump of 9.7% from Q3 2017.

Chris Robertson, UK CEO at Creditsafe, said: “It’s clear the construction industry has entered a new era of caution following the collapse of Carillion at the beginning of the year, while the current uncertainties from the Brexit negotiations are still very much a critical factor when businesses plan for 2019.

“UK companies across the sector need to ensure robust contingency plans are put in place sooner rather than later, with the need to prepare for the wide range of economic scenarios they could be faced with over the next 12 months.”