What are the prospects of more following them?
Winter is usually a hard time for the construction industry as the ground literally hardens making outdoor work an impossibility for some projects.
This is rapidly being mirrored by the financial situation many companies face in the sector as debts also begin to harden.
A recent Freedom of Information inquiry to the British Business Bank has revealed that nearly 40,000 construction businesses have defaulted on bounce back loans taken out in the previous two years – which is 15% of all the loans made to construction businesses.
A total of 260,912 construction businesses took out bounce back loans, worth a combined total of approx. £7.68 billion.
Another 679 building companies defaulted on their Coronavirus Business Interruption Loan Scheme (CBILS) loan, which was 4% of the total of these loans. This is up from the 350 that had defaulted by June.
Construction industry insolvencies since 2019
|2020(up to Nov)
Chris Horner, Insolvency Director with BusinessRescueExpert said: “The rising number of defaults clearly reflects the reality of how strained cash flow is for a lot of construction businesses right now – two years after the pandemic.
“As we can see from the latest insolvency figures – 34 construction firms went into insolvency in November alone, which is the highest monthly total in more than two and a half years.
“For many businesses things might get even worse before they get better materially. Unemployment and insolvencies are likely to continue to increase next year and even though inflation is predicted to fall, in all likelihood it will still be around the 7% mark, more than three times the Bank of England’s target figure – continuing the need for higher interest rates as a result.
“This will continue to make borrowing and repayments more expensive, assuming companies are able to access needed credit facilities.
“The construction sector was one that ran into difficulties trying to secure the necessary financing at the start of the pandemic and it was only due to the government guaranteed Covid loan schemes like bounce back loans and CBILS that they were able to get them.
“Now many have not recovered enough to service these debts, the outlook for many others could also be as tough for 2023.”
Construction and building companies, like thousands of others, will be hoping for a better economic landscape in the next year but every indicator is pointing to potentially even harder terrain than before.
So while the winter holiday break could provide some much needed downtime and a chance to mentally refresh and regroup, it can also be the perfect window to make some critical decisions for the future of a business.
These will depend on the individual circumstances faced by the company and other factors but they will usually have more scope for improvement and change than they may previously imagine.
Businesses that get in touch quickly and earlier in the process will also usually have more options open and available to them.