Below-cost bids are putting hundreds of construction SMEs at risk, says report

One in six construction SMEs would struggle to pay off short and medium term debt liabilities if required to do so, a new report has revealed.

Falling sales and wafer-thin profit margins were hampering companies ability to operate in increasingly competitive markets according to a survey by law firm Baker Tilley and Company Watch.

Nearly a quarter of SMEs suffered a 20% fall in sales last year according to the survey of 2,520 construction companies with turnover between £5m and £25m. A third revealed a decline in profit of around 50%.

Mark Wilson, partner at Baker Tilly’s restructuring and recovery unit said: “Although some in the sector may currently have the cash reserves to survive, we expect that for a number of players cash will run out as sales, and more importantly profits, continue to slide.”

“The short-term slashing of prices in order to win work does little to help the bottom line and is not sustainable in the long term.”