Construction sector first out of recession

Published:  25 June, 2009

LONDON: The property and construction sectors are likely to recover from recession first although trading in 2009 will remain tough.

Accountancy group, BDO Stoy Hayward said: "Hit hard by tightening credit markets, construction was the first sector to be dragged under and looks like the first to emerge form it."

In its latest Industry Watch report, the accountants said that despite tentative signs of recovery of lending and slowing house price falls, the property and construction sector is in for a tough year and business failures will escalate further. But 2010 may see a moderate decline in business failures although the number of insolvencies is expected to remain high.

The construction sector is the only one where the accountants have reduced business failure forecasts. It said: "Although we predict 9500 failures in 2009, this number looks set to fall significantly in 2010 as mortgage lending improves, the rate of property price falls decline and consolidation reduces capacity."

For industry as whole, the report forecasts that rising unemployment and falling disposable income growth will trigger a sharp reduction in consumer spending and drive business failures to record levels.

The report said: "If UK consumer spending has held up because of temporary, benign conditions it means that, rather than green shoots, we are merely seeing a lull before the normal course of recession continues. This is certainly what our figures indicate, with business failures in the retail sector set to rise by a third in 2009, then a further 70% in 2010. Over 7000 businesses could cease to trade in 2010, representing more then one in fifty of the sector."

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