Contractors in cash flow trouble rise by 21%

Grant Prior 14 years ago
Share

The number of construction companies facing cash flow problems has soared during the last quarter as creditors start to chase bad debts more aggressively.

Worrying figures in the latest Begbies Traynor Red Flag Report today show a surge in the number of firms facing ‘significant’ or ‘critical’ financial problems during the last quarter of 2010.

Construction is among the worst hit sectors according to the report which monitors the early warning signs of company distress.

Experts are predicting the figures will be followed by a 10% rise in insolvency levels this year.

The figures show the number of construction companies in trouble jumped 21% on the previous quarter to 19,167. The figure was also 8% up on levels during the same period in 2009.

Ric Traynor, Executive Chairman of Begbies Traynor Group, said: “Today’s figures show that UK businesses are demonstrating real signs of distress and that trade creditors are both losing patience with their debtors and in need of collecting cash into their own businesses.

“These figures indicate the renewed challenges facing businesses across most industries in 2011, particularly in the SME sector.

“The sectors most reliant on government spending are already feeling the impact of public sector cuts, confirming the financial effects of the recent contraction in the services and construction sectors.

“With the full implementation of budget cuts only starting to show through in these figures, public sector exposed sectors are likely to face significant increases in the level of corporate failures over the course of 2011.

“After seven quarters of declines in the levels of financial distress, these figures show the first evidence of a hardening of creditor attitudes and the real strain being felt by UK companies at this point in the cycle.

“These higher levels of distress would typically be expected to translate into a 10% or greater rise in formal insolvencies in 2011 (compared to an estimated 15% decline in 2010), due to hardening creditor attitudes, the impact of public sector cuts and the gradual unwinding of government support measures.

“The real concern is not just that the construction sector has fallen away since Q3 2010, but that it is 13% worse than a year ago, the biggest deterioration across the whole economy.

“With much anecdotal comment about below-cost pricing as contractors scrabble to secure work at any price to contribute to their fixed costs and as the boost to activity levels from Olympic projects wanes, the prospects for 2011 look very challenging.

“For smaller businesses, we are entering the darkest hour before the dawn; as they face the dual challenges of weak domestic demand and greater pressures from larger competitors and business customers looking to preserve their own profitability.  As such, it will be smaller businesses that bear the brunt of an increase in formal insolvencies.”

Latest news

Alun Griffiths set to rescue firm he sold for £36m

Tarmac to hand back Welsh civils contractor after five years of losses
2 days ago

Landsec to pump £2bn into new house building drive

Developer to build 6,000 homes as it sells offices to fund new schemes
2 days ago

Severfield to start steel on McAlpine car battery site

Specialist to start on £4bn site next month after steel package signed-off
2 days ago

Construction Manager of the Year crowned

Jason Hunt of Willmott Dixon wins for work on Bristol concert hall
2 days ago

Tide gets go-ahead for over 1,000-home London scheme

Volumetric expert gains planning for co-living homes scheme in Southwark
3 days ago

Vital Energi lands £250m Gatwick decarbonisation deal

Five-year programme to switch airport away from gas heating
2 days ago

Construction output flickers into life in March

First quarter activity flatlines after slow start to year
3 days ago

Skanska lifts margin to 4.3% as profit hits £78m

Infrastructure and FM drive near-tripling of profits
3 days ago

Mayor backs 46-storey student tower at Canary Wharf

City Hall overturns Tower Hamlets council rejection of 912-bed scheme
3 days ago

Plans go in for 100 acre Port of Tilbury expansion

Construction could start next year on site the size of 70 football pitches
3 days ago

Inland Homes creditors face £38m hit

Administrator confirms no cash for supply chain
4 days ago

Durkan dogged by legacy jobs despite return to trading profit

Durkan scales down new homes contracting to focus on retrofit work
4 days ago

Munnelly founder hands over CEO role to son

Paul David Munnelly steps up to CEO as father becomes chairman
3 days ago

Barking build to rent towers face rebuild

Major remedial work needed on resi scheme built by Shapoorji Pallonji UK Ltd
4 days ago

London new home starts plunge 38% as Building Safety Act bites

Capital only region to see Q1 fall in NHBC new home registrations
5 days ago

Sureserve swoops for rival compliance outfit Kinovo in £56m deal

Recommended cash offer will take AIM listed contractor private
4 days ago

Crown Golf tees up £1bn plan to build 3,000 homes on course land

Major housing plan for spare land on eight UK courses
4 days ago

Green light for Peterborough Station Quarter £48m revamp

First phase to start before the end of the year
4 days ago

Morgan Sindall starts £38m Caerphilly leisure hub

New swimming pool and health suite forms part of town regeneration plan
4 days ago

145 firms win places on £800m building safety framework

Fusion21 confirms latest winners: Full list
5 days ago

Higgins Homes and site workers face manslaughter charges

Contractor and four site staff charged after woman killed by falling pallet of bricks
6 days ago

Operator spots cracked mast on Hinkley tower crane

Hinkley Point C contractor hit with safety notice over failed mast pin and cracks
5 days ago

Countdown starts for £1bn Birmingham highways bid race

Council will break-up mega framework into five lots
5 days ago

Acciona wins £400m Thames waterworks upgrade

Lea Valley Coppermills water treatment works to get full overhaul
5 days ago

Pension giants pledge £25bn for infrastructure push

Seventeen pension providers pledge to invest in projects
5 days ago

Safety row over London tower ducking fire regs by 30cm

Fire union calls on Mayor to block Bromley flats plan over single staircase
5 days ago

Midgard lands £145m deal to build Edition Birmingham

Construction to start shortly on twin residential towers
6 days ago

McAleer & Rushe set to break £500m turnover barrier

Pre-tax profit jumped 16% to £46m last year
6 days ago

Top design team picked for £2.5bn York Central scheme

Massive city centre regen scheme moves to detailed design
6 days ago

MoD to bid £100m command HQ enabling works

Hertfordshire joint forces command centre expansion advances
6 days ago

Contractor services