One in seven construction companies could disappear if the market downturn deepens, a report has warned.

In its report, analyst Plimsoll Publishing examined figures from the top 2,000 construction companies in the UK and said an increased reliance on short-term finance was behind its forecast.

The report said: “More than a third of firms have a greater need for short-term finance. This is doubly dangerous at a time when banks are looking at their loan books and it puts companies in an even more vulnerable position.”

Plimsoll also found that a third of companies showed signs of recessionary behaviour and reported declining sales. More than half reported tightening margins, and out of these 17 were running at a loss.

A greater need for short-term finance puts firms in a vulnerable position.

Plimsoll publishing report

Meanwhile, a report by insolvency specialist Begbies Traynor has found that 565 firms experienced “critical problems” in the first quarter of 2008, compared with 201 last year.

Copies of the report are available for £350 by calling 01642-626422. Readers can request a £50 discount.