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Construction insolvencies jump 73% in Q1

Construction insolvencies soared 73 per cent in the first quarter of 2018 compared with the final quarter of 2017, according to data from Creditsafe.

There were 934 construction industry insolvencies in Q1 2018, up from 539 in Q4 2017. 

Failures in Q1 were also up 9 per cent year, with 856 insolvencies having been recorded in the first quarter of 2017.

Carillion’s collapse in January has been cited as a major factor behind the rise, with four out of the five largest failures during the period linked to the contractor’s liquidation.

Vaughan Engineering filed for administration in March citing unpaid Carillion debts as a factor in its collapse, while ground engineering firm Aspin was owed around £800,000 by Carillion before its holding company was placed into administration.

Creditsafe’s Watchdog report also revealed suppliers’ bad debt – money owed by contractors to suppliers – was up 66 per cent in Q1 compared with the fourth quarter of 2017.

Debts owed to the construction sector by others were up 34 per cent over the same period.

These factors pushed the number of firms classed as at ‘high risk’ or ‘very high risk’ of insolvency up 8.8 per cent to 37,702.

Despite the rising insolvencies and bad debts, the number of new construction companies formed was up 18.9 per cent quarter on quarter from 14,338 to 17,041.

Creditsafe chief operating officer Rachel Mainwaring said: “Figures in today’s Creditsafe Watchdog Report represent a turbulent quarter for the construction industry.

“However, the break-up of larger companies, such as Carillion, does present an opportunity for the growing number of SMEs to take a larger market share of the construction industry going forward, improving the industry’s long-term health.”

ONS output data for February released last week showed activity had dropped for four consecutive periods.

PMI data from Markit / CIPS showed the decline continued into March, with the industry experiencing its first contraction since last September.

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