Pressure builds on construction firms as output falters

Having had a tough start to the recession, the sector seemed to be picking up in 2010-11 but it seems that tentative recovery has faltered. While one extra day’s holiday contributed to this decline, a perennial funding problem remains for firms reliant on Government expenditure, with fewer projects out there."

Furthermore, research by R3 found that 16% of construction businesses are only able to pay the interest on their debts but not reduce the debt itself – this equates to 37,000 businesses.

Manning said: "We would class these businesses as ‘zombies’ – running on empty for quite some time now and any change in circumstances could push them over the edge. Without increased investment in this area, either public or private, we may see a significant rise in construction company insolvencies in the coming months.

"Unfortunately, the impact of this will not only be on the companies themselves, but on the large number of industries that supply to them. They are really feeling the pressure and they may be forced to push the pain further down the supply chain, therefore reducing the profits of those smaller firms that supply to them.

"If some of these construction firms do start to fail, then the impact on suppliers could be very serious."

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