UK construction insolvencies rise
Nearly 10,000 UK construction and manufacturing companies became insolvent in the last two years, and 2012 could see the sectors faced with the same woes, according to consultancy PricewaterhouseCooper (PwC).
In 2010, 2,527 construction companies and 2,162 manufacturing companies went into administration. Last year, 2,688 further construction companies and 1,939 manufacturers went under.
Jonathan Hook, head of engineering and construction at PwC, said, "2011 was another tough year for the construction sector and there were 6% more insolvencies in the sector in 2011 than 2010. Over the last two years we have lost more than 5,000 construction companies and the trend shows no sign of abating."
London alone suffered 927 construction insolvencies since the start of 2010. Other badly affected areas for both sectors included the West Midlands, Yorkshire region and the north west of England.
Under the ongoing cloud of economic and unemployment uncertainty, PwC said 2012 could see both sectors faced with the same challenges.
"The cuts to the government's capital programme and uncertainty around the economy and financing generally means there is little chance that 2012 will see this trend reverse. London reported a 5% decline in the number of insolvencies in the sector last year, highlighting that it is increasingly tough elsewhere in the regions, where we saw a 9% increase," Mr Hook said.
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Comments (1)
There’s no doubt that 2012 will be a frighteningly tough year for the UK construction industry, as highlighted above.
Obviously becoming agile and developing new services and products will help some, but will in many cases not be practicable. An approach that is viable for all in the industry however is to analyse their own supply chains and identify where savings can be made, often where they have not previously been considered achievable.
In recent years, a construction company would often sub-contract certain elements of a project – such as the design and implementation of an intelligent infrastructure – to a collection of half a dozen companies who would each contribute in their own way.
But each contribution brings with it its own costs and mark-ups. 2012 is therefore increasingly likely to see a preference for those sub-contractors who can provide that element of the project wholly on their own – one-stop-shops, who only need to add profit once. This shortening and narrowing of the supply chain can typically result in as much as 2% of the costs of sub-contracting being removed – a hugely valuable saving when considering the overall profitability of the entire project.
Construction companies then have the opportunity, having released costs from the supply chain, to either increase overall margins, or to offer a discount without affecting anticipated profits – a very powerful proposition in a cash-strapped industry.
Kari Baden
Dimension Data Advanced Infrastructure
Kari Badenat 10:01 on 02.02.2012
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