Banks force more contractors to the wall

Grant Prior 10 years ago
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Banks are sending an increasing number of contractors under as the industry was hit by a 12% rise in companies forced into compulsory liquidations during the last quarter.

Grim figures from the Insolvency Service show compulsory liquidations in construction jumped as the trend across all sectors fell.

Construction companies now make up nearly a quarter of all firms forced into compulsory liquidation.

Official figures show a total of 868 construction firms were lost to the industry in the last quarter alone – meaning a total of 5,460 construction firms have gone out of business since January 2011.

Accountancy experts said banks are becoming less tolerant of struggling construction companies and forcing them out of business.

Alan Harris, director at specialist construction risk management firm, CR Management said: “The construction industry continues to jog along the rough and uneven road to recovery which now looks to be a long way off.

“As a consequence a number of main contractors that we are working with are looking again at their structures with a view to making further efficiency cuts in order to compete in the current and projected market and more will follow suit, although for some they will have left it too late

“Over the past quarter it has been noticeable that the companies becoming insolvent are of a larger size and hence are having a greater impact on the market.

“In particular a number of mechanical and electrical contractors have ceased trading putting increasing pressure on main contractors to find replacement subcontractors who will guarantee the original work.

“This also puts increasing pressure on programme times leading to the possibility of projects falling behind and all of the cost ramifications this carries.”

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