Insolvencies in the construction sector increased by 20% in the fourth quarter of 2002 compared with the same period in 2001, according to government figures.
Compared with the third quarter of last year, construction insolvencies rose by 11%.

Construction and business services were the hardest hit sectors – there were 3873 insolvencies across all British businesses, up 11% on the three months to September and 15% on 2001.

Nick Hood, a partner at business rescue specialist Begbies Traynor, said: "The number of insolvencies in construction would have been much worse had interest rates not been so low. All construction firms tend to borrow too much."

This is particularly true of subcontractors, which are forced to borrow to compensate for erratic cash flows.

Insolvencies would have been worse had interest rates not been so low

Nick Hood, insolvency specialist

However, the sector is becoming a better behaved debtor, according to research group Experian. A survey undertaken in November found that contractors took an average 56.43 days to pay, three days quicker than in May of the same year.

The average across British business is 58.7 days – about a day longer than it was when the government added punitive interest to late payments in 1998.