Worrying surge in construction firms defaulting on covid loans

Grant Prior 2 years ago
Share

A surge in construction companies defaulting on covid loans could signal a wave of future business failures.

The warning comes from accountant Price Bailey after analysing data from lender the British Business Bank following a Freedom of Information Act request.

The Coronavirus Business Interruption Loan Scheme (CBILS) was closed for new applications on 31 March 2021, and businesses were given a 12-month grace period before having to start making repayments, meaning that a large proportion of borrowers have only just started making repayments on loans of up to £5m over six years.

But the data shows that of the 97,000 business awarded loans more than 2,000 have already defaulted on repayments in the first few months.

The default rate in construction is 2.5% – more than twice the default rate of some other sectors, such as arts and entertainment (1.3%) and healthcare (0.8%).

Price Bailey estimates the amount defaulted so far across all industries to be approximately £350m.

Chand Chudasama, Partner at Price Bailey, said: “Despite being in the early stages of repayment a rapidly growing number of CBILS borrowers are already defaulting on their loans due to the phasing out of Covid support measures and a worsening economic outlook.

“Businesses are being squeezed from multiple angles. Costs are rising and demand is weakening while repayments on Covid support loans are falling due.

“Defaults on CBILS are an early warning of likely insolvencies to come. In many cases it could be several months before businesses which have defaulted on CBILS repayments face debt recovery action from creditors.

“The surging level of CBILS defaults in the construction industry suggest that we are likely to see a high level of business failures for many months to come.

“Construction businesses are contending with both shortages of materials and labour and rising costs. Supply chain disruptions are making it harder for businesses to finish jobs to schedule and avoid financial penalties for late completion.”

Latest news

Police ban mobile cranes from roads over Easter

Plant hire bosses livid as forces across the country extend abnormal load embargoes
3 hours ago

Director jailed for exposing workers to asbestos

Ten tonnes of asbestos insulating board stripped out by unqualified workers
7 hours ago

Site labour rates start rising again

Industry's biggest payroll firm says "it feels like things could be turning round"
11 hours ago

Council finds extra £33m for Buckinghamshire link road

South East Aylesbury Link Road costs soar by nearly 30% to £147m
11 hours ago

Quartet win £490m North West & Central railway works deal

Skanska, Kier, Octavius Infrastructure and Story Contracting bag major projects deal
11 hours ago

Unite Students plans first major mixed-use scheme

Developer's first mixed BTR and PBSA project to be built in Edinburgh
1 day ago

Galliford Try names new finance director

Rentokil's Kris Hampson joins contractor to replace Andrew Duxbury
12 hours ago

Council boss hits out at bat threat to £274m road job

Natural England could scupper scheme due to be built by Ferrovial
12 hours ago

Hydrogen-fuelled diggers to be allowed onto highways

Government to raise barrier to widespread use of hydrogen fuelled plant in construction
1 day ago

Plans in for £118m Government hub in Darlington

Work pencilled to start later this year on new home for 1,450 civil servants
1 day ago

New contractor highlights Henry Construction jobs on website

New firm lists jobs by failed contractor to show its experience
2 days ago

Contractors line up for £2.6bn Anglian Water AMP8 deal

Eight big names land places on pioneering @one Alliance
2 days ago

McAleer & Rushe bags first major later living project

Work to start this month on 167-flat Royal Tunbridge Wells project
1 day ago

Kier starts first all-electric prison houseblock job in Kent

Next-generation fully electric T60 prison houseblock to be built at HMP Elmley
1 day ago

Keepmoat sees better times ahead in housing market

Profits dip in 2023 despite construction of record number of new homes
1 day ago

Vistry signs partnership deals for 1,900 mixed tenure homes

West Sussex former airfield and Newmarket sites to break ground
2 days ago

Turnover at Wates tops £2bn for first time

Construction division exceeds £1bn turnover as average contract value hits record high of £48.3m
2 days ago

L&G looks to sell Cala Homes in exit from house building

Insurance giant reported to be preparing to offload 3,000 homes-a-year developer
3 days ago

Multiplex profit almost trebles as margin hits 5.5%

Revenue jumps 20% to £675m as big London scheme complete
2 days ago

TopHat puts plans to open huge Corby factory on hold

Advanced manufacturing facility was due to employ 1,000 people
3 days ago

Laing O’Rourke lands Calderdale hospital job

Enabling works to start by the end of this year at West Yorkshire site
2 days ago

Go-ahead for £475m Sunderland film and TV studios

Work to start this year on first phase Corwn Work studios
2 days ago

Willmott Dixon set for £20m Stockport Community Hub

Planning decision expected in June on Marple leisure and health clinic project
3 days ago

Police hunt for blundering dumper truck thief

Raider drove into a fence before getting stuck on a bank
3 days ago

Beattie Passive files administration notice

Passivhaus pioneer has been in business for more than ten years
4 days ago

McAlpine set for £50m space and tech centre

Northumbria Uni sign pre-con deal for new satellite research hub
3 days ago

VolkerFitzpatrick seals £34m Kent road viaduct

Work to start next year on Sturry Link Road near Canterbury
3 days ago

Eight win £600m Scottish civil engineering framework

Balfour, Farrans, Graham and Morgan Sindall win major works lot
3 days ago

Site engineer crushed to death by excavator

22-year-old victim died just months after graduating from university
5 days ago

NG Bailey fined £135,000 after hospital site death

Worker died after striking overhead beam while navigating a mobile elevating work platform
6 days ago

Contractor services