Credit, Collections & Insolvency News
A new report from Red Flag Alert has predicted that a perfect storm of factors could lead to more than 6,000 company insolvencies in the UK construction sector during 2023.
The report has estimated that there is currently around £300 million of bad debt within the UK construction sector, which it says could rise to £1 billion by the beginning of 2024.
As a result of the issues facing the construction industry, the report has warned that over 100 firms in the sector could collapse each week. There are fears that the total number of UK company insolvencies across all sectors could rise to 32,000 this year.
The construction sector is facing a raft of headwinds at the outset of 2023, with bad debt at failing companies dragging other companies into distress as unpaid bills exacerbate other issues, including supply chain disruption, staffing shortages, inflation, interest rate increases and the ongoing impact of Covid-19.
Mark Halstead, Red Flag Alert’s Director of Data, said “The rising costs of operation and borrowing, married with supply issues and economic uncertainty means that 2023 is a perfect storm for insolvency in the construction industry.”
“The UK cannot afford to have a weak construction industry and it is time the government showed firm support.”
“Not only do we need construction to lead the bounce back from this recession but we are facing a housing crisis where we are short one million homes in our housing stock. This problem can only be solved by a healthy and well supported construction industry.”
Red Flag Alert Chief Economist Dr Nicola Headlam said “This is not good news for the industry and UK as a whole. This will lead to a much smaller pool of construction companies available for contracts and for suppliers to do business with.”
“The post-recession economic bounce back will be hampered by a lack of building companies available for projects in the next growth stage, and a supply chain that will be unable to respond to growth signals. This will choke off growth in the next economic cycle.”
“By supporting construction and funding house building, the government can turn the vicious cycle of insolvency in the industry into a virtuous circle where money flows through the supply chain as opposed to bad debt.”
