Banks most likely to cut overdrafts at construction firms

More construction and property firms have had their overdrafts cut than any other sector of the economy, research has revealed.

According to the study by strategy consultant Roland Berger, which spoke to 32 finance directors at companies with a minimum turnover of £250m, 44% of construction and property firms have had unused credit cut compared to a pan-industry average of 34%.

The average level of the cut was 34%, which was the second highest sector of the economy, and 66% of companies said reduced liquidity will force them to cut jobs.

Roland Berger restructuring and turnaround partner Klaus Kremers said: “This is a really serious problem. Cashflow is the lifeblood of the construction industry and there will be serious problems if you take it away.”

He said the banks’ approach showed they didn’t understand the cashflow patterns of the contracting industry, which needs headroom to cover peaks and troughs over the year.

The survey also found that 44% of respondents now have tighter covenants on their debt and 47% said they felt under pressure to spend unused facilities.

For more results and a full report into the overdraft crisis facing the construction sector click the related story below.