Trouble for construction industry as more contracts placed on hold

A rise in the value of building projects being put on hold might mean more construction firms end up seeking insolvency advice in the near future.

According to a report from Glenigan, the value of contracts being put on the back burner increased by 16 per cent in the three months to August in comparison to the same period last year.

Furthermore, the number of projects being placed on hold rose by 65 per cent year-on-year, which could indicate the value of contracts is also dropping.

The Federation of Master Builders (FMB) claimed that the figures are unsurprising, with its own members – especially those in the small and medium enterprise sector – having noticed falling workloads over the past two-and-a-half years.

FMB director of external affairs Brian Berry explained that the data reflects the general direction of the entire economy.

"Why we have seen these ongoing decreases in construction activity is because of the effects of government cutbacks in public expenditure – particularly in terms of new schools and hospitals – and also that private house building has slumped," he said.

"Last year we only built just over 100,000 new homes compared to a target of over 240,000 and it looks as though that figure will be as bad, if not worse, this year as it was last year."

The expert added that the UK government and local councils have been cutting back on plans to create new social housing and developers have been slowing production as there are few people who can actually afford to buy thanks to the requirements for big deposits.

"They can't actually get onto the housing market as a result of the banking crisis that we had three years ago," Mr Berry noted.

"For first-time buyers, they need a deposit of 25 per cent or more which, for most young people, is totally unaffordable. Because of that, what you are finding is that people can't move up the housing ladder."

With such a bleak outlook for the industry, some construction firms might be in need of business recovery services unless things change.