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Signs Pointing in Right Direction

According the latest report from Creditsafe, the UK construction industry is benefiting from the current economic recovery

The findings from the respected analyst of computer credit reports show increased volumes of building and repair projects across both residential and industrial sectors.

While Creditsafe’s figures show the number of construction companies growing by 5.6% from 203,157 to 214,521 in 2014, additional new figures from the Office of National Statistics (ONS) demonstrate that despite a slowdown in house building in the last quarter, output from the construction sector rose by 7.4%, the strongest expansion since 2010.

A further indicator of the changing profile of the creditworthiness of construction firms was the fact that just 5% were in Creditsafe’s highest risk band at the end of 2014, compared with 11% at the start of the year, while nearly a quarter (23%) were found in the lowest risk band compared to just 13% in 20131.

BAD DEBT

Creditsafe’s analysis shows that despite the growth in numbers of companies as well as their productivity, there continues to be a high proportion of bad debt in the industry.

The total value of outstanding County Court Judgements (CCJs) currently held against construction companies is over £31 million, while 8,080 construction companies have either outstanding or satisfied CCJs held against them with an average value of some £5,410. In addition firms in the construction sector continue to be late payers with on average invoices being settled some 17 days beyond their due date.

The construction sector has been on a rollercoaster ride since 2008 when the recession began, with work on new projects pulled and delayed as funding dried up. Output in the construction sector fell faster than the whole economy in 2008. Poor weather over the past few years has also played its part, including the severe windy and rainy conditions experienced in the winter of 2013/2014, which prevented private house builders from completing new estates in time.

“It is encouraging to see growth in both the number of construction companies operating in the UK and in their productivity and annual output,” said Rachel Mainwaring, Operations Director, Creditsafe. “However, as our analysis shows, late payment and bad debt is a big problem in the industry and it pays to understand as much as possible about a construction company’s financial health before going to business with them.”

Caption            While activity in the UK construction industry is welcome, concern has been expressed by Creditsafe that bad debts are still too high.

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