Figures from the latest Red Flag update by accountant Begbies Traynor show the number of construction companies experiencing ‘significant’ or ‘critical’ financial problems fell by 17% in the second quarter of 2010 to 17,033 compared to last year.
But experts at the firm are warning that any recovery could be derailed by planned public spending cuts.
Firms are classed as being in trouble if they are facing CCJs worth more than £5,000, a winding-up petition or have insolvent or out of date accounts.
The survey warns that construction is coming out of recession slower than other industries and that the latest figures are still historically high compared to 13,718 firms in trouble during the second quarter of 2008.
Nick Hood, Partner of Begbies Traynor, said:“We have already seen the value of new contracts tendered fall by 40% between the first and second quarter of this year and the public sector spending cuts are yet to fully impact the industry.
“The cuts announced this week to the BSF programme will hit contractors hard.
“This follows major infrastructure and hospital project cancellations and deferrals totalling over £10bn announced shortly after the new government took office and the station refurbishment cutbacks by Network Rail.
“There is a growing risk that, even if the UK avoids a potential double‐dip recession, it could develop a twin track economy, with public‐sector dependent industries such as construction facing higher levels of financial distress than sectors which are less directly linked to government spending cuts.
“Builders are likely to be hardest hit of all.”