More than half of building contractor firms have noted falling margins, indicating that a recession could be on the way, according to an analyst’s report.

Also, more than a third indicated a need for short-term financing, a sign that costs are running ahead of cashflow, according to the report from Plimsoll.

“This is doubly dangerous at a time when banks and financiers are looking hard at their loan books and therefore places these companies in an even more vulnerable position,” Plimsoll says.

The report, based on data from 2000 contractors, said that one in nine firms could disappear if the trend continued or deepened. David Pattison, senior analyst, said: “I was surprised how much the market is feeling the pressure.”

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