The quarter kicked off with unexpected collapse of Carillion, which left thousands of suppliers unpaid and countless employees without work. The impact was clearly felt in the construction industry as four of the top five failures across the industry related to the collapse of the infrastructure giant.
Creditsafe data shows failures across the construction industry totalled 934 in Q1, an increase from 539 in the previous quarter. Figures also revealed suppliers bad debt (money owed by the construction sector to suppliers) increased by two thirds (66.0%), while companies bad debt (money owed to the construction sector) increased by one third (33.5%).
In addition, the Watchdog figures show that alongside the rise in company failures and bad debt, the construction sector experienced a decline in growth, with total sales decreasing by 6.2% from £313.3bn to £293.8bn between quarters.
Despite the negative backdrop for the industry, there has been some good news for the construction sector with the number of new companies in the industry rising by 18.9% over the last three months, an increase from 14,338 to 17,041.
Rachel Mainwaring, COO at Creditsafe, commented: “Figures in today’s Creditsafe Watchdog Report represent a turbulent quarter for the construction industry. However, the break-up of larger companies, such as Carillion, does present an opportunity for the growing number of SMEs to take a larger market share of the construction industry going forward, improving the industry’s long-term health.”
Creditsafe’s research also revealed the risk level of insolvency for businesses operating within the construction sector. Of the 405,310 currently active companies, 37,702 are classified as being at Very High or High risk, an increase of 8.8%.