Corporate stress monitor shows North East hit hardest, with 149% annual rise in critical financial problems

Construction firms suffering financial problems increased by 126% in the first quarter of 2009 compared with a year earlier, new data has revealed.

Business recovery and restructuring specialist Begbies Traynor's Red Flag Alert system, which monitors early warning signs of corporate stress, showed a rise in critical actions among building firms across all regions of 126% over the year.

Its data revealed that the number of construction companies with “critical problems” rose 16% between the final quarter of last year and the first quarter of 2009.

Building firms in the North East showed the greatest rise, with a 149% rise in Q1 2009 from the same period in 2008.

Nick Hood, partner at Begbies Traynor said: “In spite of the initiatives taken by the government in this year's Budget to support the [housebuilding] industry, it seems likely that there will be more pain for some time to come.

“There is encouraging evidence that more credit is now being made available and that the rate of house price depreciation may be slowing, but with unemployment on the rise and housing sales still at a low level, any recovery in the industry seems some way off.”