Insolvency ‘will continue to threaten construction firms’

Posted 09/02/2010

Construction companies have been warned to expect a continued risk of insolvency in 2010, despite a decrease in the number of failures among building firms.

Financial and business adviser Grant Thornton told the Press Association that the signs of falling insolvencies in the construction sector do not necessarily mean that the industry has recovered.

The latest Insolvency Service figures show that 427 construction firms went into administration in 2009, which is 8.8 per cent lower than the number recorded the previous year.

However, Phil Westerman, head of construction at Grant Thornton, said this rate is still relatively high and may be set to increase again due to the continuing low demand for new property.

He added: “The construction sector often lags behind others in recovering from a downturn so we may therefore see an increase in business failures before things significantly improve.”

This comes after insolvency trade body R3 this week also stated that companies are likely to remain threatened by economic uncertainty, with a double-dip recession still potentially possible.