Opinion: Banks send contractors to the wall

Aaron Morby 12 years ago
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The recent spate of contractors being forced into administration is a warning that the mood among banks has taken another turn for the worse.

Banks are having to find money to bolster their reserves and pay out handsome bonuses to city workers.

But is seems construction contractors are paying the price for this new round of rewards in the financial sector.

This latest wave of company failures differs from that seen two years ago when the housing market suddenly foundered.

Then small trade contractors were caught as work dried up over night, this time round well-established contractors are going down, firms that sailed through the last downturn.

No sector appears to be immune to the new aggressive line on loans with concrete, steelwork, and groundwork contractors falling by the wayside in recent weeks.

The construction industry faces even tougher times ahead as public spending slows.

But if the country is to recover on the back of sustained private sector growth, it is crucial that over zealous banks are reined in before they do lasting structural damage to the construction industry.

What has been forgotten is that the construction industry has propped up the wider economy for the last two quarters keeping it in growth.

Allowing banks to turn the flow of money off at a whim while they get their houses in order will do lasting damage, strangling contractors struggling to find their next job.

The industry trade bodies and lobby groups recently have done a great job in trying to convince the Government that investment in construction drives growth and prosperity.

It is now time to raise the alarm about keeping funding channels open to businesses.

Tight controls on mortgage lending have suffocated the housing recovery.

There is a real risk that a sudden clampdown on lending to construction firms will wreak similar havoc and damage the recovery.

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