The number of construction businesses going into administration in the third quarter (106) has fallen by 4.7% compared to the first quarter(111), according to the Insolvency service.
This is also a 47.2% drop from the peak of 156 construction business failures that were seen in the last quarter (Q4) of 2008.
“There has been a steady decline in the rate of business failures in the construction industry this year but the 106 failures in Q3 mirror the 104 failures seen at the same period last year,” said Head of Construction at Grant Thornton Kathryn Hiddleston. “It is also not far off the 2008 average of 117 construction business failures, which means that there has yet to be a significant decline in construction businesses going under. Failures in construction companies are still at a high rate and remain a major concern for the industry, despite the recent decline.
“The tangible improvements in construction business failures may be partially driven by an upturn in the housing market as well as continued government infrastructure. However, rising unemployment and its effect on foreclosures indicates looming house price falls, which will undoubtedly impact the demand for construction businesses and services. Construction usually lags other sectors in recovering from a slump, so it is likely to fall much further before a real upturn is seen. Unfortunately this will not help the vast number of existing construction work which is now being considerably prolonged and even shelved.
“Hopefully, measures in the Pre Budget Report should act to mitigate some of the effects of the challenging climate being experienced by construction businesses. However, it remains important that they continue to remain focused on managing and sustaining their cash flow and finding effective ways of appropriately meeting customer demands.”