Number of firms on 'critical list' soars

The number of construction firms with “critical problems” in their businesses has increased six-fold in the last year, according to new research.

Corporate rescue specialist Begbies Traynor said that 1055 construction firms suffered critical problems in the third quarter of 2008, a rise of 547% from the same quarter last year. This also represents an increase of almost two-thirds from the 639 companies reporting these problems in the 2nd quarter of the year.

Construction firms totalled almost a quarter of all of the 4566 companies under the category. Begbies Traynor defined a critical problem as a firm facing a County Court Judgement of over £5,000 against it or a winding-up petition. The survey takes into account all UK incorporated companies with assets of more than £10,000 that have been up and running for more than a year.

Nick Hood, partner at Begbies Traynor, said, “We would encourage all businesses to protect themselves from the downturn by managing their exposure to risk, investing in customer retention strategies, controlling their costs and cash flows, and improving their internal business processes where possible."

"While this may seem to be stating the obvious, we often find that businesses fail to focus on these basic principles early enough or, in some cases, at all. Today, more than ever, cash is vital, so cash generation and conservation should be top priorities.”