Nearly a third of West construction firms are at risk of failure in the next 12 months, according to new research.
This compares to 25.7% of businesses at risk across all sectors in the region and comes on the back of a fall in UK construction output in the first quarter of this year.
The research by R3, the trade body for insolvency professionals, shows that late payment is a factor and combined with the continuing decline in workloads is hitting the sector hard.
Regional chair of the R3 Joanne Rumley, a partner at Bristol law firm Bond Dickinson, said: “The West has recently seen a number of new developments which are already having a positive effect on the construction industry in the area, including the new distribution park in Avonmouth, the second phase of Bath Spa University’s development project and a cadet training centre for Wessex Reserve Forces in Nailsea.
“However, these recent figures suggest that construction businesses will do well to remain cautious as issues such as late payment will remain critical.
“In a flat market or recession where construction isn’t thriving – where there is effectively an oversupply of sub-contractors and pricing is very slim – the lifeline of regular prompt payments is essential to keep the system flowing.
“Any delay in payment could push a sub-contractor into a downward spiral. If a subcontractor can’t pay their own employees who might walk off site, it can necessitate the need for agency workers, costing even more or even withdrawing from site entirely. At present there is currently a squeeze on margins, not just cashflow in the construction sector.”
