Credit, Collections & Insolvency News
New research from CompanyDebt has predicted an incoming wave of business failures among the UK’s construction sector.
The report says that supply and demand in the global energy market have pushed prices to a record high this month in what industry pundits are called a ‘perfect storm.’ Energy prices are now over 250% higher than they were in January, and will likely keep climbing.
Construction experts warn that these energy hikes will impact the costs of ceramic products, glass, steel, aluminium, and bricks, causing noticeable repercussions to the UK building industry. For a sector already facing fuel, labour, and HGV driver shortages, these cost inflations will add further pressure, tipping some construction businesses into insolvency.
In October, British Steel announced a £30 per tonne price hike, saying it could no longer absorb rising energy costs alone. The move echoes one which is occurring in multiple industries whose profits margins are closely tied to energy prices
Simon Renshaw, Insolvency Practitioner said “This current situation shines a light on fragility at the heart of our supply chains. Most of our foundational industries are energy-intensive and have no choice but to raise their own prices when facing higher manufacturing costs. The building industry is, by consequence, one of the worst affected as they rely directly on products that must be fired, smelted or furnace-heated.”
“The UK construction industry finds itself in a perilous position which will undoubtedly lead to more insolvencies over the coming months.”
“With the end of government support meeting the energy price crisis, it’s unsurprising the number of administrations and receiverships in the construction industry doubled to 34 during the third quarter of 2021.”
“The construction sector has its hands full right now with wage inflation, supply-chain issues, and now a cost-increase that shows no signs of slowing down. Firms will need to re-assess their pricing very carefully, and manage risk as the winter progresses.”
“Nevertheless, we are likely to see increase corporate collapse in the coming months. This sector, critical to the health of our economy, remains vulnerable.”