A combination of bad weather and reduced public sector spending caused administrations in the construction sector to rise for the first time in eight quarters, according to new figures.
David Bennett, restructuring partner at Grant Thornton in Birmingham, said the industry had been on the receiving end of a ‘perfect storm’ of circumstances.
He said: “In some cases the severe weather conditions in the latter part of 2010 played a key part in the failure of some construction companies, where a halt in activity over a number of weeks was just enough to tip them over the edge. Local construction companies are also echoing the national picture, with the latest casualty Coventry-based GAJ Group, which went into administration at the end of January.
“These latest figures end the eight consecutive quarters of a decline in administrations, which had been assisted by improved market conditions and strategies put in place by businesses and the government to ride out the storm.
“Taking into account a fall in the level of employment in the sector, Government spending cuts and the deferral of some projects, construction businesses would have undoubtedly felt the pinch in the final quarter of last year.
“Uncertainty over future business prospects remains and will not be helped by the increase in raw material prices as well as the latest VAT increase.”
Administrations across all sectors by 1.4 per cent in the final quarter of 2010 to 642, up from 633 in the previous quarter, representing a 24.4 per cent decrease on the same quarter in 2009 with 849 administrations.
Mr Bennett added: “This rise reflects the increasing pressure that many UK firms are facing. However, these figures are still way off their peak in the first quarter 2009, when 1,311 companies fell into administration. The Government’s austerity measures will increasingly impact on the private sector economy as the cuts accelerate but the growing probability of a sustained rise in interest rates poses the biggest threat to companies with obligations to service large debts.”