Business rescue firm issues red flag alert for construction

Published:  16 July, 2009

MANCHESTER: The latest report from Begbies Traynor has shown that year-on-year, Q2 2009 showed a 48% increase in the number of construction companies showing ‘significant’ financial distress, compared to Q2 2008.

Red Flag Alert is a quarterly monitor of early warning signs of company distress by Begbies Traynor, the UK's leading business rescue, recovery and restructuring specialist.

The report also showed that quarter-on-quarter, Q2 showed a 6% decrease in companies in the construction sector with ‘critical’ problems against Q1 2009.

The experience of Begbies Traynor is that a significant number of those companies with such financial problems tend subsequently to enter into a formal insolvency procedure within a year.

Nick Hood, a partner of the firm, commented: "Although the construction sector has seen the biggest swing from 94% year-on-year to -6% quarter-on-quarter in the number of companies facing ‘critical' problems, the sector is not out of the woods.

“While construction projects commissioned three years ago may still be ongoing, the demand for new buildings cannot continue while unemployment continues to rise and credit remains difficult to come by.

“Within the construction sector, the lag on any economic recovery is likely to be more pronounced given how far it sits down the ‘food chain’."

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