Construction industry failures up by a quarter in Q1

The first quarter of 2011 saw a 23 per cent increase in the number of building firms going into administration in the UK in comparison to the previous three-month period.

Going by the Wickes Tradebuilder figures, it might be plausible to assume that a large number of construction firms will be seeking insolvency advice as we approach the fourth quarter of the year.

The report noted that the construction sector has been the second worst affected industry in the financial downturn behind wholesale and retail.

It highlighted that the failure rate of new businesses in the building industry is second only to restaurants.

Business Link suggested that while company owners across all sectors often lack the relevant knowledge and expertise to actually run the business side of their venture, the construction sector seems to be worse-equipped in terms of understanding finance, purchasing, selling, production, and hiring and managing employees than other markets.

Director Ray Lambe explained that the number of lone traders and home-based start-ups in the building industry means there is a lack of support in terms of the administration of businesses.

"There is evidence that many businesses know to operate in terms of their trade but not necessarily in terms of operating as a business, but it does seem to be particularly acute in the construction sector, with so many small organisations running," he said.

"Two-thirds of those questioned [said] they wouldn't even know where to start when it comes to promoting their business."

This, Mr Lambe claimed, stems right from getting new contracts to managing cash flow when they are actually trading – a fact that could leave some needing insolvency advice to help avoid becoming bankrupt.

"But then also, even if they are successful, there are issues around them feeling confident enough to hire new employees; they are worried about the red tape associated with that, whereas actually with a little advice from the online service they can potentially increase their confidence and be able to expand as well."