It’s clear the industry has entered a new era of caution following Carillion’s collapse at the start of the year.
Compounding this shift in sentiment, inevitably, is the still-unknown outcome of Brexit negotiations – a critical factor for businesses across the supply chain when formulating plans for 2019.
The prospect of a no-deal quite rightly continues to cause anxiety in what has already been a challenging year for the industry. Evidence of this can be found in the September Markit / CIPS PMI, which recorded the slowest growth in construction activity for six months.
Creditsafe’s most recent Watchdog report for Q3 2018 does not make for great reading either. Most notably, the number of construction company failures totalled 943 during the third quarter, compared with only 527 in the same period a year earlier – a staggering year-on-year increase of 78.9 per cent.
Some of the more notable failures between July and September this year included mechanical and electrical contracting firm George Birchall, which collapsed after almost 40 years of trading, leading to the loss of 141 jobs. Cuddy Demolition and Dismantling was another, after previously being given a high risk rating in November 2017.
There was further bad news when measuring the total revenue accumulated by the construction sector, which fell by 1.7 per cent year on year to £301bn. The number of new construction firms that started up during Q3 meanwhile fell 4.4 per cent quarter on quarter to 16,150.
However, despite this quarterly drop in start-ups, the overall number of active companies operating in the industry rose 11.5 per cent year on year in the third quarter to stand at 419,410.
State of flux
Nevertheless, the health of the industry remains in a state of flux. Despite Theresa May’s insistence that housing is a key priority for the government, it’s hard to avoid the fact that Brexit’s outcome will have a deciding influence on whether key policies are able to match the rhetoric.
So what should businesses across the supply chain do?
Companies need to ensure robust contingency plans are put in place sooner rather than later, with preparations made for the wide range of potential economic scenarios over the next 12 months.
Undertaking a thorough analysis of the supply chain is an essential step to make sure you can withstand whatever Brexit fallout we experience.
Chris Robertson is the chief executive of Creditsafe