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Construction insolvencies down in June

Insolvencies in the construction sector fell to 327 in June, compared to 338 a year earlier, according to a report by Experian.

The number of construction firms becoming insolvent in June fell to 327, a fall of 3.3 per cent, compared to June 2009.

While this is positive, the number of insolvencies for the UK as a whole fell by 13 per cent, to 1,771, indicating that the construction sector is still perfroming worse than the general economy.

The financial strength of construction firms, as measured by Experian, deteriorated despite the lower number of firms going bust.

Managing director of pH Group, the Experian subsidiary undertaking the survey, Rolf Hickman said: “June’s data indicates that the UK’s business community as a whole is stabilising, however it also points to the existence of a north versus south divide. Businesses in the north of England seem to be faring slightly worse than their southern counterparts across all industry sectors.”

“Although the data hints at some improvements, individual organisations are impacted in different ways. It is vital for businesses to understand the circumstances of those they are doing business with and the risks they could expose them to.”

The North East and Yorkshire had the worst figures, with 0.14 and 0.12 per cent of firms failing respectively, while the strongest areas were London and the South West, where 0.08 and 0.07 per cent of firms failed.

In the construction industry, 0.2 per cent of all companies went into liquidation during June 2010.

Although a reduction in the number of construction firms becoming insolvent is positive, and correlates with the recent Begbies Traynor Red Flag Index, the outlook for the sector is still negative, given the massive cuts in Government spending still to come.