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Administrations in construction fall 28pc

The number of construction companies going out of business looks to have dropped significantly in the third quarter of 2012, as total insolvencies across industries in England and Wales hit a five-year low.

The figures from the Insolvency Service provide a partial picture for insolvencies in construction. It shows a 20 per cent drop across four categories of insolvency, from 718 to 575.

According to the figures, construction administrations in England and Wales dropped from 89 to 68 in the quarter, and are down 28 per cent year-on-year, from 94.

Creditors’ voluntary liquidations fell from 480 to 448 by quarter, which represents a 17 per cent decrease year-on-year, from 541.

Voluntary arrangements were up from 27 to 34 quarter-on-quarter, but down from 39 a year earlier.

Receiverships were down from 31 to 25, and down from 44 a year earlier.

The figures for compulsory liquidations have not yet been counted. They dropped from 241 to 195 a quarter earlier - representing a 30 per cent fall year-on-year – and have fallen in the previous three years.

Similarly, bankruptcies, which saw 418 instances in Q2, have also seen a drop in the previous three years.

Numbers were also down in Scotland across compulsory and creditors’ liquidations in Q3.

Across all industries, compulsory liquidations and creditors’ voluntary liquidations in England and Wales saw a 2.8 per cent drop on the previous quarter to 3,971, down 6.6 per cent year-on-year.

In addition, 986 firms went into administration, receivership or a company voluntary arrangement – representing the lowest level since 2007.

Mark Wilson, restructuring and recovery partner at Baker Tilly, said: “These numbers fly in the face of the Office of National Statistics numbers released last month, which revealed that construction output for the three months to August 2012 was 11.6 per cent lower than the corresponding quarter in 2011.

“Forecasts for growth in the sector are not strong, with a generally held view that growth has stalled until 2014.

“Whilst the insolvency figures should be welcome news, there must be a concern that they are lagging behind the trends being currently experienced in the industry.

“We still consider this sector to be one that will continue to experience pressure over forthcoming months, particularly if harsh weather strikes.”

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