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Construction insolvencies double since 2016

Construction insolvencies have doubled in two years from 340 in Q3 2016 to 677 in the same quarter of this year, new data from Dun & Bradstreet (D&B) has revealed.

Insolvencies in the sector have now remained at a steadily high level in all three quarters of 2018, having stood at 662 in Q1 and 688 in Q2.

The business analyst’s data revealed that more firms collapsed between January and September this year than in the whole of 2015.

D&B’s figures show there were 2,027 insolvencies from January to September this year, compared with 1,526 in 2015 as a whole and 1,369 in 2016.

The running total for 2018 is also just short of the 2,349 insolvencies recorded in 2017.

Construction insolvencies were up 16.5 per cent in Q3 2018 year on year, with D&B’s latest report suggesting that outlooks among construction firms were weakening.

It stated: “Worryingly for the construction sector, confidence indicators are trending downwards, suggesting rising pessimism.”

Last week the latest Markit / CIPS purchasing managers’ index fell to 52.1 for September from 52.9 in August (where 50.0 indicates no change).

This suggested that industry growth slowed during the period, with September’s figure the lowest for six months.

However, D&B’s report added that new orders and overall employment levels have continued to rise, despite the rise in company failures.

The analyst said survey respondents cited growing political uncertainty around Brexit and a ‘wait-and-see’ approach among clients as the main drags on activity.

Federation of Master Builders chief executive Brian Berry said: “These figures are extremely worrying.

“We know that projects across the country are being stalled because there physically aren’t enough people to build them. In turn, wages are rising because of this increasing scarcity of skilled tradespeople.

“This coupled with the fact that material prices are continuing to soar has undoubtedly led to the margins of construction firms up and down the country being squeezed.”

Mark Robinson, Scape Group chief executive said: “We should be concerned about these figures. SMEs are the lifeblood of the supply chain and their health is vital for the industry as a whole – we all benefit when they are doing well.

“The collapse of Carillion exposed the very real vulnerability of suppliers and, crucially, it brought to light major problems around payment, with some contractors waiting as long as 120 days. Yet ten months on there is still a lot more to be done to ensure fair payment and contract practices.”

“Tier 1 contractors and public sector clients each have an important role to play in ensuring they are providing stability and certainty for their supply chains through fair payment practices. Scape is calling for all commissioning clients to ensure payments to Tier 1 contractors within 14 days, for contractors to pay Tier 2 suppliers within 19 days and Tier 3 suppliers within 23 days, improving upon the current requirements of the CSCPC Fair Payment Charter.

“With Brexit on the horizon, it is more important than ever to look after our suppliers and ensure we are fostering a system that supports SMEs wherever possible and is fit for the future.”

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