The construction sector contributes around 7% of the UK’s GDP – more than £110bn – and supports more than 2.4m UK jobs. Back in October the sector signalled some positivity, especially in the residential sector, where the UK stamp duty cut was contributing to an increase in new orders at the fastest pace for almost five years. And CreditSafe has reported that just 2024 construction firms ceased trading in 2020 – a 10-year low.
But these foundations of growth and stability are starting to look shaky as the pandemic continues to bite. It seems that Government financial initiatives and a ban on winding-up orders have been masking the true picture and we’re starting to see the sector’s financial problems.
Recent data from the ONS (January 2021) indicated that more than 12% of construction firms currently have low or no confidence that they will survive until the end of April 2021.
This week (Feb 2021) Construction News has reported that profit warnings among construction companies hit their highest level in 2020 – with 33 warnings among listed companies in the year. This is according to analysis by consultant EY, the previous high was 19 warnings in 2012.
But, as in many sectors, it is likely to be the smaller firms that feel the squeeze most. Bigger businesses will be looking to hold cash and extend payment terms, added to which the shortage of EU labour and increase in material costs will compound their misery.
The Channel Partnership continues to be open for business in the construction sector, supporting suppliers and sub-contractors with credit insurance – the secure way to manage trade credit risk. We remain alert to what’s happening in all sectors and our expert advisers are able to provide sector specific advice. Please give us a call.