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More building firms are failing in the North East
by Chris Knox, The Journal
Aug 11 2011
THE North East’s construction sector has seen the highest rate of business insolvencies in the UK over the last five years as the economic crisis continues to hamper a recovery in the industry.
New data from information services company Experian shows that 531 building firms collapsed between 2007 and this year, which is the highest proportion of total insolvencies in the country.
Some of the biggest recent casualties have been Newcastle-based Dorin Construction, which lost almost 100 staff when it went under at the start of the year, and Whelan Construction, also in Newcastle, which saw nearly 50 workers lose their jobs when the firm closed last month following a fall in orders.
The Experian report compares each region’s construction companies by looking at a number of financial and non-financial criteria, including profitability, cashflow, payment history and timeliness of account filing.
Simon Streat, managing director of Experian’s SME business, said: “The construction industry, like many other sectors within the North East economy, has experienced an erratic insolvency rate over the past few years, generally staying higher than the national average.
“They are likely to have been impacted by the high level of insolvencies seen by all businesses within the region, causing many local construction businesses to lose key clients or vital suppliers. As a high-cash industry operating within tight margins, construction is highly sensitive to late or non-payment of bills.
“With late payments in the North East currently standing at three weeks beyond terms, this is going to have a huge effect on the cashflow of local construction businesses, making insolvency an ever-increasing possibility.”
Although the number of insolvencies in the North Each is far less than those in other regions, including London and the South East, which have seen around 2,000 insolvencies each since 2007, the region has consistently reported the highest insolvency rate as a percentage of its total business population.
The North East’s reliance on public sector contracts, which have been hit by Government spending cuts, is likely to be one reason for the industry taking a bigger hit in the region.
Steve Waggett, North East regional manager of Clugston Construction, said: “Like many sectors in the North East, a lot of building companies in have been highly exposed to the public sector over recent years.
“With a number of schemes coming to an end, such as the Building Schools for the Future programme, much of this work has disappeared, which has damaged some businesses more than others.”
The report also highlighted the plight of medium-sized contractors – those employing between 26 and 100 people – which, it said, lack the flexibility and low overheads of smaller firms, yet struggle to compete with the financial strength and resources of their larger rivals.
Catriona Lingwood, chief executive of Constructing Excellence in the North East, said: “It has been heartbreaking to see so many North East building firms go under over recent years.”
Although the number of insolvencies in the North Each is far less than those in other regions, including London and the South East, which have seen around 2,000 insolvencies each since 2007, the region has consistently reported the highest insolvency rate as a percentage of its total business population.
The North East’s reliance on public sector contracts, which have been hit by Government spending cuts, is likely to be one reason for the industry taking a bigger hit in the region.
Steve Waggett, North East regional manager of Clugston Construction, said: “Like many sectors in the North East, a lot of building companies in have been highly exposed to the public sector over recent years.
by Chris Knox, The Journal
Aug 11 2011
THE North East’s construction sector has seen the highest rate of business insolvencies in the UK over the last five years as the economic crisis continues to hamper a recovery in the industry.
New data from information services company Experian shows that 531 building firms collapsed between 2007 and this year, which is the highest proportion of total insolvencies in the country.
Some of the biggest recent casualties have been Newcastle-based Dorin Construction, which lost almost 100 staff when it went under at the start of the year, and Whelan Construction, also in Newcastle, which saw nearly 50 workers lose their jobs when the firm closed last month following a fall in orders.
The Experian report compares each region’s construction companies by looking at a number of financial and non-financial criteria, including profitability, cashflow, payment history and timeliness of account filing.
Simon Streat, managing director of Experian’s SME business, said: “The construction industry, like many other sectors within the North East economy, has experienced an erratic insolvency rate over the past few years, generally staying higher than the national average.
“They are likely to have been impacted by the high level of insolvencies seen by all businesses within the region, causing many local construction businesses to lose key clients or vital suppliers. As a high-cash industry operating within tight margins, construction is highly sensitive to late or non-payment of bills.
“With late payments in the North East currently standing at three weeks beyond terms, this is going to have a huge effect on the cashflow of local construction businesses, making insolvency an ever-increasing possibility.”
Although the number of insolvencies in the North Each is far less than those in other regions, including London and the South East, which have seen around 2,000 insolvencies each since 2007, the region has consistently reported the highest insolvency rate as a percentage of its total business population.
The North East’s reliance on public sector contracts, which have been hit by Government spending cuts, is likely to be one reason for the industry taking a bigger hit in the region.
Steve Waggett, North East regional manager of Clugston Construction, said: “Like many sectors in the North East, a lot of building companies in have been highly exposed to the public sector over recent years.
“With a number of schemes coming to an end, such as the Building Schools for the Future programme, much of this work has disappeared, which has damaged some businesses more than others.”
The report also highlighted the plight of medium-sized contractors – those employing between 26 and 100 people – which, it said, lack the flexibility and low overheads of smaller firms, yet struggle to compete with the financial strength and resources of their larger rivals.
Catriona Lingwood, chief executive of Constructing Excellence in the North East, said: “It has been heartbreaking to see so many North East building firms go under over recent years.”
Although the number of insolvencies in the North Each is far less than those in other regions, including London and the South East, which have seen around 2,000 insolvencies each since 2007, the region has consistently reported the highest insolvency rate as a percentage of its total business population.
The North East’s reliance on public sector contracts, which have been hit by Government spending cuts, is likely to be one reason for the industry taking a bigger hit in the region.
Steve Waggett, North East regional manager of Clugston Construction, said: “Like many sectors in the North East, a lot of building companies in have been highly exposed to the public sector over recent years.