Suicide bidding cuts contractors income by 20%

Grant Prior 14 years ago
Share

A quarter of construction companies with a turnover of between £5m and £25m have seen a drop in income of more than 20% as suicide bidding spreads.

Research from Baker Tilly and Company Watch focused on latest filed accounts in the construction SME sector to unearth the falls.

The slashed turnovers are compounded by the fact that one in six firms have a current ratio of below one -suggesting potential difficulty in repayment of any short to medium-term debt liabilities.

But the research did show liquidity is stronger in the construction sector than for SMEs across all industries.

Mark Wilson, partner at Baker Tilly Restructuring and Recovery LLP said: “Although some in the sector may currently have the cash reserves to survive, we expect to see that for a number of players, cash will run out as sales, and more importantly, profits – continue to slide.

“The short term slashing of prices in order to win work does little to help the bottom line and is not sustainable in the long term.

“Rising costs globally in the sector, largely raw materials caused by rising energy prices, are also hitting the profits in construction much harder than in other sectors.

“In addition, there is concern that we are yet to see what the full impact of the public sector cuts will be – but the early ripples have already been too much for some.”

The figures also show that almost one in three construction companies have seen a 50% plus fall in their Profit Before Tax (PBT).

Denis Baker, CEO of Company Watch said: “The fall in revenues and profitability in the construction sector highlights not just the liquidity issues for the struggling companies themselves, but also the deteriorating risk profile for their stakeholders, such as suppliers and clients who need to be proactive in controlling and managing down their exposure to potential failures in the sector.”

Wilson added: “Seeking early financial advice is critical to survival in many cases.

“Anecdotally, this is not something many construction managers will have been used to doing, as they have always traded in relatively good times.”

Latest news

Balfour Beatty terminates Danny Sullivan labour deals

Around 500 workers on HS2 will be moved to alternative agencies or be taken on direct
1 day ago

Trio face prosecution after Hinkley site death

Main contractors and client to face charges over death of site supervisor
1 day ago

Buyers see recovery in house building sector

But civil and commercial work still in the doldrums
2 days ago

Apprentice saws-off thumb on hotel refurb site

Court hears how digit was reattached and teenager continued training with another firm
2 days ago

Laing O’Rourke tops June contracts league

£919m animal super lab dominates new orders
2 days ago

TSL turnover smashes £500m as profit almost trebles

Data centre and logistics contractor rises high on surging demand
2 days ago

Gleeson Homes chief exec leaves business after restructure

Management revamp after "challenging" year
2 days ago

Green light for 1,600-home Oldham town centre overhaul

Plans for over 1,600 homes across six regeneration sites approved
2 days ago

DSM wins Norwich city centre clearance job

Anglia Square shopping centre clearance for £300m scheme
2 days ago

13-year-old becomes UK’s youngest qualified digger driver

Grandson of Gallagher Group chairman sets industry record
2 days ago

Cubby reborn in £12m Svella-backed takeover

£50m revenue target set as 14 firms combine under new Cubby Group banner
3 days ago

North East NHS trusts plot £3bn health estate overhaul

Market engagement begins for major construction push across four trusts
3 days ago

HG goes green on cranes in £1.2m switch to battery power

Diesel-free crane drive cuts fuel bills by 94%
3 days ago

Developer fined £165,000 for fire safety failings

Firm ignored fire safety orders on apartment job in Preston
3 days ago

Bidding to start for £1.8bn North West framework

Contractors invited to bid for latest Procure Partnerships deal
3 days ago

Hill hits record £90m profit as homes pipeline swells

Build-to-rent push and £4.8bn contracting book to fuel next growth phase
4 days ago

Rayner unveils £39bn plan to build 300,000 social homes

Council building revival and rent reform feature in social and affordable homes plan
4 days ago

Keltbray bounces back with £3.2m profit

Tighter controls and smarter project selection fuel strong turnaround
4 days ago

VINCI JV wins 500-home twin town centre revamps

Chester Northgate phase 2 and Northwich Weaver Square schemes move to delivery stage
4 days ago

80 energy projects unlocked as Ofgem backs grid expansion

£24bn energy networks deal gets green light from regulator
5 days ago

How to see your stories on the Enquirer

Join our Suppliers and Buyers directory to get your news published
4 days ago

Henley lands Midland Mill revamp on Leeds tower scheme

Restoration of 18th-century mill kicks off on South Bank regeneration project
4 days ago

New boss at Eric Wright Civil Engineering

Gavin Hulme takes top job as Diane Bourne moves to group role
4 days ago

Pinewood submits £1bn data centre plan

Studio giant adds green and learning spaces to tech hub blueprint
5 days ago

Record results after TClarke goes private

Britain's biggest M&E contractor flourishes after de-listing
5 days ago

Dalkia lands £200m nuclear maintenance deal

1,000 nuclear FM staff to join M&E contractor
5 days ago

Construction comeback to outpace wider economy

Arcadis forecast fueled by spending review optimism
6 days ago

First steel goes up on giant car battery site

Severfield gets to work on McAlpine Somerset site
6 days ago

Permasteelisa wins cladding deal on Bovis city tower

Facade specialist lands package at 60 Gracechurch Street
5 days ago

Fox buys recycled asphalt specialist Fisher

Acquisition adds major recycled asphalt capacity in north west
6 days ago