Insolvency figures show 23% of failures come from Construction Industry

The Insolvency Service’s official insolvency statistics came out this week revealing that there were 1040 compulsory and 3075 voluntary liquidations in the second quarter of 2012. The good news that compulsory liquidations are down 13.9% on the previous quarter and down 18.7% on the corresponding quarter of last year.

What is significant is a 12% rise in the number of construction companies forced into compulsory liquidations compared to a drop of 13.9% across all other business sectors. Construction and property firms also made up 23% of the total number of all businesses in England and Wales forced into compulsory liquidation.

There were 27,390 individual insolvencies in England and Wales in the second quarter of 2012. This was a decrease of 10.2% on the same period a year ago.

This was made up of 8,088 bankruptcies (which are down 27.1% on the corresponding quarter of the previous year), 7,956 Debt Relief Orders (DROs) (which are up 9.6% on the corresponding quarter of the previous year) and 11,346 Individual Voluntary Arrangements (IVAs) (which were down 6.6% on the corresponding quarter of the previous year).

Tremark director Mark Hodgson said,

‘The figures suggest that the construction industry is still some way behind and continues to struggle. Many contractors are attempting to make cuts to remain competitive but many seem to have left it too late. We continue to receive regular instructions subs contractors who are becoming frustrated at delays in getting paid by the main contractor. We have seen many scenario’s where sub-contractors are forced to either cease trading or refuse to carry on work, resulting in the main contractors being put under pressure to find replacements, who are prepared to guarantee the original work and also complete the work in time to avoid the cost ramifications of failing to meet deadlines.’