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1 in 4 Compulsory Liquidations is in Construction

A total of 5,460 construction firms have gone out of business since January 2011 and 6,146 since September 2010. The number of firms out of business in the second was 6% lower than in Q1.

There was a 12% rise in the number of construction companies forced into compulsory liquidation, compared to a drop of 14% across all other business sectors. Construction firms also made up 23% of the total number of all businesses in England and Wales put into compulsory liquidation, suggesting that the banks are becoming less tolerant of struggling construction companies and forcing them out of business.

By comparison, the number of voluntary liquidations dropped by 15% but still made up nearly 16% of companies across all sectors in England and Wales voluntarily entering liquidation.

Alan Harris, director at specialist construction risk management firm, CR Management said:

“The construction industry continues to jog along the rough and uneven road to recovery which now looks to be a long way off. As a consequence a number of main contractors that we are working with are looking again at their structures with a view to making further efficiency cuts in order to compete in the current and projected market and more will follow suit, although for some they will have left it too late.”

“Over the past quarter it has been noticeable that the companies becoming insolvent are of a larger size and hence are having a greater impact on the market. In particular a number of mechanical and electrical contractors have ceased trading putting increasing pressure on main contractors to find replacement subcontractors who will guarantee the original work. This also puts increasing pressure on programme times leading to the possibility of projects falling behind and all of the cost ramifications this carries.”