Press Releases
25 January 2011
Number of builders going bust falls by 23% since recession peak
- But more problems ahead as public sector contracts wane
The number of insolvencies[1] in the construction industry has fallen by 13% over the last year to 1,470 in the last three months (Q3 2010) down from 1,685 a year ago (Q3 2009),says Wilkins Kennedy, the Top 22 accountancy firm.
Insolvencies in the construction industry have fallen by 23% from their peak of 1,913 during the recession in Q1 2009.
According to Wilkins Kennedy, economic growth has finally halted the rot in the construction sector. However, Wilkins Kennedy says that in part, construction sector insolvencies are down because so many of the weaker construction companies have already been driven to the wall over the last three years.
Construction was one of the sectors hardest hit by the recession, registering a total of [9,918] business failures in the three years following the run on Lehman Brothers (end of Q3 2008) to the most recent quarter (end of Q3 2010).
Anthony Cork, Director at Wilkins Kennedy, comments: “This news will come as a relief for the construction sector. The pre-recession bubble in the economy was largely property led so when the bubble burst, much of the construction industry was left reeling.”
“As office rents and house prices have clawed their way back, developers have started to dust off project plans put on hold during the recession. This has begun to feed through to significant new orders for the construction sector that for the last few years have been heavily reliant on public sector work.”
Wilkins Kennedy warns that although private sector work is beginning to pick up, the public sector pipeline is now beginning to suffer.
Wilkins Kennedy says that overall, construction orders have fallen from £12.1 billion in Q2 2011 to £11.7 billion in Q3 2010. Orders for public sector housing are particularly weak.
Other public sector building programmes, such as Building Schools for the Future, that have been cancelled mean that the construction sector is expected to a have bumpy ride to recovery.
Explains Anthony Cork: “Whilst private sector work might replace the shrinking public sector order book, the transition is going to be tough for many individual construction companies that now specialise in public sector work.”
Wilkins Kennedy also points out that companies that still have outstanding bank loans that are coming up for renewal may struggle to roll those debts over with their banks.
Says Anthony Cork: “Banks are still recovering from the damage they suffered during the recession. They had their fingers badly burnt and are still reluctant to lend to the construction industry. Those banks are going to demand higher interest margins, higher arrangement fees and tougher covenants. It is going to hurt.”
Insolvencies in the construction sector since the collapse of Northern Rock
Examples of recent insolvencies in the construction industry
- ROK Plc (In Administration – Nov 2010)
- Connaught Plc (In Administration – Sept 2010)
- John Laing Partnership Limited (John Laing Partnership was the social housing unit of John Laing Group before the two businesses split in 2002) (In Administration – Oct 2010)
- CJ Haughey Construction (In Administration – Dec 2010)
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[1] Include Compulsory liquidations, Creditors' Voluntary Liquidations, Receiverships, Administrations, Company voluntary arrangements (CVA), Trading-related bankruptcies.
Press Contacts:
Anthony Cork
Director - Insolvency
Wilkins Kennedy
Tel: 020 7403 1877
Mob: 078 8060 1962
Nick Mattison or Sarah Forsey
Mattison Public Relations
Tel: 020 7645 3636
Mob: 07931 685 714
