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Construction firms in financial troubles rockets 547pc

The number of construction firms facing severe financial difficulties has increased by 547 per cent compared with this time last year according to business recovery firm Begbies Traynor.

The number of construction firms facing severe financial difficulties has increased by 547 per cent compared with this time last year according to business recovery firm Begbies Traynor.

The latest Begbies’ Red Flag Alert statistics show a major increase in construction firms facing “critical” conditions with County Court Judgements over £5,000 or winding-up petitions against them.

There were 1,055 firms falling into the critical category over the last three months, compared with 163 for the third quarter of 2007 and a 65 per cent increase on the 639 in Q2.

The construction sector continues to suffer badly, as the housing market downturn affects many businesses beyond builders.

Decreasing funding ability has brought the completions market to a standstill across much of the UK.

The property services sector has also seen a 600 per cent increase in ‘critical problems’ over this same period last year.

Begbies Traynor partner Nick Hood said: “In the current climate, you’d expect the construction, property and retail sectors to suffer – and our research certainly corroborates that.

“As further economic uncertainty lies ahead, we would encourage all businesses to protect themselves from the downturn by managing their exposure to risk, investing in customer retention strategies, controlling their costs and cash flows, and improving their internal business processes where possible.

“While this may seem to be stating the obvious, we often find that businesses fail to focus on these basic principles early enough or, in some cases, at all.”