Press Room
Construction business failures fall in Q3, but challenges lie
ahead warns Grant Thornton
Kathryn Hiddleston, Head of Construction at Grant Thornton
comments on the latest provisional data on administrations in the
Construction Industry.
The Q3 2009 provisional data, issued by the Insolvency Service
shows 106 administrations of construction businesses. This is 4.7%
down from the 111 construction business failures in Q2 and a fall
of 13.2% from the 120 construction administrations in Q1. This is
also a 47.2% drop from the peak of 156 construction business
failures that were seen in the last quarter (Q4) of 2008.
"There has been a steady decline in the rate of business
failures in the construction industry this year but the 106
failures in Q3 mirror the 104 failures seen at the same period last
year. It is also not far off the 2008 average of 117 construction
business failures, which means that there has yet to be a
significant decline in construction businesses going under.
Failures in construction companies are still at a high rate and
remain a major concern for the industry, despite the recent
decline.
"The tangible improvements in construction business failures may
be partially driven by an upturn in the housing market as
well as continued government infrastructure. However, rising
unemployment and its effect on foreclosures indicates looming house
price falls, which will undoubtedly impact the demand for
construction businesses and services. Construction usually lags
other sectors in recovering from a slump, so it is likely to fall
much further before a real upturn is seen. Unfortunately this will
not help the vast number of existing construction work which is now
being considerably prolonged and even shelved.
“Hopefully, measures in the Pre Budget Report should act to
mitigate some of the effects of the challenging climate being
experienced by construction businesses. However, it remains
important that they continue to remain focused on managing
and sustaining their cash flow and finding effective ways of
appropriately meeting customer demands."