Insolvencies hit UK construction hardest

The construction industry was the worst affected sector in the UK for corporate failures in 2010, according to statistics from PricewaterhouseCoopers (PwC).

The sector suffered 565 insolvencies during the fourth quarter of 2010 compared with manufacturing with 410 and retail with 399.

And PwC business recovery partner Mike Jervis said the demise of UK residential contractor Rok in November 2010 demonstrated that construction sector companies were still vulnerable.

"It is telling that overall construction insolvencies during 2010 were still +15% above those experienced in 2008," Mr Jervis said.

Nevertheless, the overall UK insolvency figures represented an improvement on 2009. PwC said a total of 15894 companies became insolvent in 2010 compared to 19512 during the previous year.

Some 3605 companies became insolvent in the fourth quarter of 2010, representing a -6% decrease on the previous quarter and a -19% decrease in comparison to the same quarter of 2009.

"Overall insolvency numbers are back to those seen in 2008. But 2008 was a year of contrasts - pre and post 15 September, when Lehmans filed for bankruptcy. 2010 has seen insolvency volumes stabilise as businesses are proactively managed in intensive care and options other than insolvency are pursued with vigour," Mr Jervis explained.

However, PwC warned that UK businesses were not out of the woods yet.

"We expect looming public sector cuts to hit the bottom line of many public sector suppliers," Mr Jervis said.

A modest increase in interest rates would also put additional pressure on many struggling companies, and the prospect needs to be factored into company cash flow forecasts and scenario planning, PwC added.