Tough times continue for construction

UK construction firms are continuing to face tough financial conditions in the first three months of the year to June, according to a report by Euler Hermes.

The UK Cash Flow & Profit Report for the second quarter of 2006, compiled through questionnaires by financial directors, or those in similar roles, showed that although year-on-year growth of free cashflow returned to a positive after two consecutive quarters of decline, there was negligible growth of just 1%, well down on the economy average of 3.4%.

Reduced turnover and rising costs were blamed for much of the weakness in the industry's cashflow figures, along with a rising incidence of late payments from UK customers.

The report added that profit in the industry also continues to suffer, declining for the third successive quarter in the face of sharply rising costs and high levels of discounting.

However, the construction sector remains optimistic with firms forecasting a free cashflow in excess of 5% in the coming year - a figure above the whole economy average of 5.1%.

[Contract Journal, 9 August 2006, p. 2]