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Surprise drop in construction failures in England and Wales

8 Aug 11 Latest data from the Insolvency Service figures show a 3.8% drop in the number of construction companies going out of business in England and Wales in the last quarter.

The fall follows an 18% rise in the first quarter of 2011.

There was a 26% rise in the number of companies going into receivership – up from 38 in Q1 to 48 in Q2, but a drop across all other insolvency routes including compulsory and voluntary liquidations and administrations which means a net decrease in the number of firms going out of business. 

Creditors' voluntary liquidations declined from 586 companies in Q1 to 555 in Q2. This number peaked in Q1 2009 at 649.

Administrations fell from 101 in Q1 to 85 in Q2. Company voluntary arrangements fell from 38 to 30.

Alan Harris, founding partner of construction risk management company, CR Management, said: “Conditions in the construction industry continue to be challenging and many expected the number of construction companies going out of business to continue rising so it is welcome news that the reverse has happened and we’ve experienced a decrease instead.

“However one quarter does not make a trend; the industry has not been helped by the announcement that in June the number of projects on hold increased by over 40% starving the market of opportunity and putting even greater pressure on businesses to win work and to win it with a profit margin.

“The future continues to look challenging and there may well be an overall upward trend in construction companies becoming insolvent due to mounting pressure on tender prices generated by a lack of opportunity and increases in material cost. The only saving grace at present is the continuing low interest rates.”

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