Construction insolvencies jump 8% in 2017

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Construction insolvencies rose by 8% in 2017, with more than 2,600 companies going under, according to new research

Figures compiled by accountancy firm Moore Stephens show 2,633 firms fell into insolvency in 2016-17 compared with 2,447 in 2015-16.

The research comes on the back of the liquidation of Carillion, the UK’s second largest construction company, which collapsed owing money to many of its subcontractors.

Moore Stephens said many of those firms will receive just a fraction of the money owed. Carillion held just £29m in cash when it entered liquidation, with debts of almost £1.3bn to its banks alone.

It added that Carillion’s collapse is symptomatic of the financial difficulties facing many construction companies, with tight profit margins and high overheads in terms of materials and labour exacerbated by the “epidemic” of late payments across the sector.

Construction companies had to wait an average of 69 days for payment in 2015-16, up from 52 days the year before. Carillion had been criticised for over extending its standard payment terms to 120 days.

Lee Causer, restructuring and insolvency partner at Moore Stephens, said: “The fall of Carillion could be the trigger for even more construction companies going under.

“Carillion has already left a huge number of subcontractors out of pocket, when they are already facing enormous financial pressures.

“Profit margins in construction are already very tight, and late payment of subcontractors is now standard procedure for far too many in the sector.”

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