Measured by gross value added, UK construction activity fell by 17.1% between the first quarter of 2008 and the second quarter of 2009 – three times the fall the UK economy as a whole suffered in the downturn and in a shorter time. From the fourth quarter of 2009 until the same period in 2011 there was a short period of recovery, but this was not sustained and construction activity fell into recession again – what economists call a “dead cat bounce” – before the sustained recovery kicked in from midway through 2012.

When recession hits, major contractors respond by bidding lower for contracts, leading to lower or even negative margins. They also keep a greater proportion of retentions and extend payment terms. SMEs are more reliant on cash flow and less able to find other sources of finance, especially once the banks reduce lending to construction, as happened in the recession. As a result, the effects of declining demand on SMEs are exacerbated. The construction industry lost 481,000 employees, more than one in five people in the industry, and employment yet to climb back to the level of 10 years ago.

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