New research suggests that the number of companies in the construction sector that are in ‘significant financial distress’ has increased by almost half in the past year, compared to the same period last year.
The new quarterly Red Flag Alert by Begbies Traynor looks at the second quarter of 2009.
However, when compared with the first quarter of 2009, the picture is more promising, with a 6% decrease in the number of companies with ‘critical’ problems.
The construction sector saw the biggest decline - 16% - of companies with “Significant” problems compared to the last quarter.
Begbies Traynor Partner Nick Hood said: “Although the construction sector has seen the biggest swing from 94% year on year to -6% quarter on quarter in the number of companies facing “critical” problems, the sector is not out of the woods.
“Whilst construction projects commissioned three years ago may still be on-going, the demand for new buildings cannot continue whilst unemployment continues to rise and credit remains difficult to come by. Within the construction sector the lag on any economic recovery is likely to be more pronounced given how far it sits down the food chain,” he said.
Year-on-year, the number of construction firms with:
‘significant’ problems rose from: 13,079 to 19,325, a 48% rise.
‘critical’ problems rose from: 639 to 1,241, a 94% rise.
Quarter-on- quarter, the number of firms with:
‘significant’ problems decreased from 22,966 to 19,325, a 16% drop
‘critical’ problems decreased from 1,315 to 1,24, a 6% drop