Construction insolvencies drop 22.5%

New figures for second quarter insolvencies show a 22.5% drop from last year.

New figures from the Insolvency Service show that 86 construction firms entered administration during the second quarter of 2010. The figure is 22.5% down from the 111 businesses that collapsed in the same period last year. It was also fractionally down from the 87 firms that failed in the first quarter of 2010, and the 90 that failed in the final quarter of 2009.

Phil Westerman, head of construction at finance advisor Grant Thornton, said: “Less business failures in the construction industry is a sign that the sector is moving in the right direction, despite the fact that the decline is only a marginal 1.1% from Q1 2010. Construction companies still face very difficult conditions which may worsen if more building projects are adversely affected following the coalition government’s Comprehensive Spending Review due to be published in October.

“It is encouraging to see some signs of recovery in the construction industry where administrations in the sector have fallen for more than five consecutive quarters.  In addition, many indicators have pointed to incremental increases in property prices, which may provide the impetus for some construction companies to resume developments.

“The UK economy is still quite volatile and public sector cuts are effecting the confidence of many construction firms, impacting on the pipeline for future work in the sector and leading to tough trading conditions which we will expect to see during the next two quarters of 2010 and beyond.”