Worrying surge in construction firms defaulting on covid loans

Grant Prior 12 months 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

Ilke Homes put up for sale in battle to save modular builder

Works stops at factory and sites as loss-making offsite specialist fights for survival
22 hours ago

Henry Construction crashes into administration

Hundreds of trade contractors hit by collapse of £400m revenue firm
2 days ago

Barratt to demolish 36 new homes with faulty foundations

Problems found on Cambridge estate
1 day ago

Firms readied for £750m Parliament repairs deal

Strategic Estate is renewing the estate repair framework
1 day ago

Magna Park developer to build 1.4m sq ft of spec sheds

Four major warehouse units to be spec built as total space hits 13m sq ft
1 day ago

Second staircases to delay resi tower projects by 9 months

Cost consultants cuts London tender price rise forecast to 2% this year
1 day ago

Plan approved for tallest resi tower in Wales

£55m project will be built next to Cardiff's Central Square
2 days ago

Bowmer + Kirkland bags £46m events centre in Derby

Developer keeps to original fixed price contract figure despite inflationary pressures
1 day ago

Costain dropped from £1.3bn A66 road job

National Highways pulls Costain off TransPennine upgrade and demands its £1bn A12 widening now shared as a JV
2 days ago

Laing O’Rourke plans to cut 200 staff jobs

Dartford head office to see bulk of job cuts
3 days ago

SES Services restructures senior team

New MD Rob Clifford to head four new divisions at M&E specialist
2 days ago

Galliford Try ranks top in May contracts league

Kier holds pole position for highest value of work won over last 12 months
2 days ago

£800m NEPO construction framework winners

BAM, B&K, Caddick, Esh and Morgan Sindall secure places for first time
2 days ago

Manchester Uni reboots 3,300-bed campus plan

Initial £7m demolition package out to tender ahead of planning submission
2 days ago

Subcontractors wanted across Derbyshire

Register now to meet big name buyers at latest Constructionline event
2 days ago

House builder Lane End owes £12m to suppliers

Administrators probing claims by creditors about company transactions prior to failure
4 days ago

£500m Suffolk construction framework winners

Fourteen contractors and seven M&E specialists secure spots on East of England framework
3 days ago

Illegal cartel whistleblower reward raised to £250,000

Competition watchdog hikes rewards to flush out more construction bid rigging activity
3 days ago

McLaren wins £28m East London health centre job

New three-storey health centre to be built in Hornchurch
3 days ago

Balfour sells telecoms division to Obelisk

Irish infrastructure firm continues expansion plans with Balfour acquisition
4 days ago

Blackburn M65 £20m junction 5 revamp to go-ahead

Balfour Beatty to be confirmed this week to start mobilising in November for 2025 start
4 days ago

Unfit planning system means 4,700-year wait for onshore wind

Call for urgent planning reform for even a chance to meet net zero and housing ambitions
3 days ago

Commercial work boosts construction new orders

Buyers report inflation easing to its weakest for 32 months
4 days ago

Mace, T&T and Atkins secure place on MoD framework

JV wins provide technical services on £5bn defence optimisation programme
4 days ago

Enabling works start on £200m Cambridge station

Murphy starts site preparation ahead of main contractor award next month
5 days ago

Industry aims to be almost diesel-free by 2035

Big players agree first steps to eliminate diesel from most sites
4 days ago

Weston Homes plans £50m East London scheme

Land deal for 147 homes at Town Quay Wharf in Barking
4 days ago

Lee Marley Brickwork hires Countryside regional FD

Matt Sheehan joins from house builder's partnerships arm
4 days ago

Demolition deal awarded on Chancery Lane refurb

General Demolition Ltd lands demolition and enabling works package
4 days ago

Contractors no longer lagging on digital transformation

Construction shrugs-off image as late adopter of technology
4 days ago

Contractor services