Construction cashflow falters

Published:  22 May, 2009

LONDON: The latest Survey of UK Companies from Euler Hermes UK, highlighted further deteriorations in both profits and cashflow in the UK construction sector. The profitability of companies operating in the sector deteriorated for… 

a seventh successive quarter during Q1 2009, reflective of weak domestic demand, rising raw material prices, continuing competitive pressures and heavy price discounting. 

The rate at which profitability deteriorated was only modest, and much weaker than in recent quarters.

There was evidence that reduced labour costs and record lows in interest rates had supported profitability in Q1.

Cashflow in the construction sector was 7.5% lower than 12 months ago. This was a record fall and the steepest of all sectors in Q1.

The difficult macro-economic environment, which has led to a sharp downturn in revenues amid tight credit conditions and an uncertain outlook, remained a key factor depressing cashflow.

There was also evidence that rising payment delays were negatively impacting on construction companies' cashflow during Q1.

Payment delays from domestic clients rose at a near survey record pace, according to the latest data.

Deteriorating cashflow also negatively impacted on construction companies' suppliers.

Delays in payments to vendors rose at an unprecedented rate. 

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