Sharp rise in construction firms on brink of collapse

Aaron Morby 3 months ago
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The number of construction firms judged to be in danger of collapse leapt by a third at the end of last year.

Previously high inflation followed by higher interest rates and a slowdown in construction activity has left thousands of construction firms in critical financial distress.

The latest Begbies Traynor Red Flag Alert report for the final quarter of last year revealed the number of construction firms on the brink of collapse grew rapidly by 33% to 7,849.

Client-side risks are also running high with the Real Estate & Property Services sector seeing a 25% jump in firms judged to be near the brink, ranking this financial sector third most stricken behind construction in top place and support services in second.

The warning comes after firms in the civils sector are reporting 2024 getting off to a particularly slow start due to heavy flooding, followed by freezing temperatures and now stormy weather.

Julie Palmer, partner at Begbies Traynor, said there were now serious concerns over the construction and real estate sectors, which represented nearly 30% of all businesses in critical financial distress.

She said: “Now that the era of cheap money is firmly a thing of the past, hundreds of thousands of businesses in the UK, who loaded up on affordable debt during those halcyon days, are now coming to terms with the added burden this will have on their finances.

“As we saw in the previous quarter, the strain being placed on companies has extended well beyond the consumer-facing businesses with bellwether sectors, like construction and real estate, now in serious jeopardy as over 15,000 businesses face high risk of failure.

“Sadly, for tens of thousands of British businesses who should be looking ahead to 2024 with some degree of optimism, the new year will bring a fight for survival as the debt storm that has been brewing for years looks like it is breaking across the country.”

Data and credit checking specialist Red Flag Alert carries out regular financial checks on businesses.Subscribers to the Red Flag Alert service benefit from early warnings about the financial health of companies to help them avoid bad debts.

The Enquirer has linked-up with Red Flag Alert to offer readers a discount on its services and help you avoid worthless invoices from insolvent companies.

For more information and to benefit from the Enquirer discount click here.

 

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