Insolvencies in the industry drop more than 42% from peak but experts warn that situation could worsen

The number of construction firms going into administration in the last quarter of 2009 fell by 15% from the previous quarter.

Provisional data, issued by the Insolvency Service shows 90 administrations of construction businesses in Q4 of 2009, compared to failures in Q3 and representing a fall of 18.9% from the 111 construction administrations in Q2. This is a 42.3% drop from the peak of 156 failures seen in the last quarter of 2008.

Overall, 2009 saw 427 construction companies fail, an 8.8% drop from the 468 failures seen in 2008.

Phil Westerman, head of construction at Grant Thornton, said:"It is always positive to see tangible improvements in the construction sector and it is a big surprise that the figures in Q4 are not worse given the adverse weather conditions experienced in December.

"Construction business failures are still relatively high and averaged 106 business failures per quarter in 2009. Although this is lower than the 2008 average of 117,  this continues to be a major concern for the industry.

"Even though the UK has officially come out of  recession, the construction sector often lags behind others in recovering from a downturn so we may therefore see an increase in business failures before things significantly improve."