Failures set to increase as suicide bids hit home

Grant Prior 12 years ago
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Insolvency specialists are warning that the rate of construction failures is set to speed-up as the effects of suicide bidding hit home.

Latest figures from the Insolvency Service revealed that construction administrations bucked the all-industry trend by increasing during the second quarter as 89 firms went under compared to 83 in the previous three months.

And Graham Bushby, Restructuring and Recovery partner at Baker Tilly, warned that there is worse to come.

He said: “The construction sector continues to be in the insolvency doldrums and bucked the quarterly downward trend seen in administrations across UK industry overall in Q2 2012.

“For the first time during the recession, Q2 administration numbers (89) have increased on Q1’s expected seasonal high (83 in Q1). This increase is 7.2%.

“Increased tendering discounting on fewer contracts overall, along with the unexpected poor weather conditions in the first half of 2012 are clearly beginning to take their toll, regardless of London 2012 construction activity and Olympic feel good factor.

“Baker Tilly’s recent research into the financial performance of construction companies (£2-25 million turnover) found that almost a quarter saw their profits before tax (PBT) fall by 50% or more in 2011.

“A further four-in-ten registered a slump in PBT of between 10% and 20%.

“We have recently seen a number of cases referred to us where heavy discounting at tender stage has proven detrimental to profitability levels.

“There is some light at the end of the tunnel for a number of stalled contacts, with funding available as part of the Growing Places Fund.

“However, this is likely to be restricted by geography and be highly scrutinized with regard to the best economic and social impact on communities.”

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