Despite an estimated 9.3% decline in industry output last year and a further 2% fall forecasted by industry economists for 2013, Begbies Traynor latest Red Flag Alert research shows significant improvement in the health of the UK construction industry.
The Red Flag Alert research monitors the financial health of corporate UK and shows that construction and real estate have led an overall improvement in the UK economy.
The research shows a 34% reduction in construction distress cases (23,190 in Q3 2012 to 15,291 in Q4 2012) and a 57% reduction for the real estate sector (35,959 in Q3 2012 to 15,343 in Q4 2012).
Begbies Traynor deputy regional managing partner Julie Palmer said: "Our Red Flag figures demonstrate an improvement in the financial health of the construction sector, which we believe reflects the fact that those construction firms that have survived the crisis are now benefitting from improving margins on a lower cost base. It is also evident that some construction firms have purchased land banks at substantially discounted prices following the financial crisis which, combined with a material improvement in the sector's output towards the end of 2012, are encouraging signs. In addition large infrastructure projects such as the construction of HS2 rail link should have a considerable positive impact on the sector in the medium to long term while, in the nearer term, the sector is benefitting from decreased competition since the onset of the crisis and continued creditor forbearance, with our analysis showing increased liabilities across the sector.”
She added: "The overall improvement in the construction and real estate sectors may also reflect an easing in the mortgage market, which has been much lauded as the main beneficiary of the Funding for Lending scheme, launched in August 2012. Although these sectors are typically the first to be hit in a recessionary environment, they are also usually the first to come out the other side, so this positive development could be a predictor of a slowly improving UK economy overall."
Private sector housebuilding accounts for approximately 14% of total construction output.
Got a story? Email news@theconstructionindex.co.uk
