Twenty four hours after you have read this, a further six construction firms will have entered insolvency. And by the time the next issue of Contract Journal hits your desk, a total of 42 companies will have become insolvent.
It is a frightening figure - and one which exceeds the number of retailers going into insolvency, a sector which is widely known to be suffering as a result of consumers ratcheting back their spending. According to PricewaterhouseCoopers, the number of insolvencies in construction has risen 20% compared with the same time last year, and is higher than the all-industry average of 12%.
It is worrying that construction has been so badly affected, and after such a short time of economic upheaval. As expected, subcontractors working in the housebuilding and commercial property sectors have been worst hit, but there are signs that the downturn is biting deeper.
Contractors across all sectors are seeing debtor days increase and that feeds down the supply chain from main contractor to the smallest subbie. Construction certainly isn't an easy industry to be part of in a downturn - when your biggest cost is people, who need to be paid regardless or whether or not your firm has received payment for the work, you are entering difficult territory.
It may be that this shake-up will see the industry emerge with a fitter, highly professional pool of contractors. The fittest, who manage their businesses well, take tough decisions before they become crises, and who work to ensure clients cannot quibble with invoices, should survive. And that should be good news for an industry where, just perhaps, it has been too easy to set up in business and take advantage of the boom times.
And let's not forget that infrastructure and other public sector work is still going strong. Add to that the fact that ConstructionSkills believes more people will need to join the industry to meet workload demand, and the news isn't all bad. It might be a rough ride for some just now, but it's not all doom and gloom.
Subscribe to CJ's blog by RSS