Firms struggling to repay covid loans, new data shows
Fresh warnings are being made about a spike in insolvencies in the coming months as official figures said the number of construction firms going bust fell in April.
According to the Insolvency Service, the month saw 384 firms in the industry go under, compared with 419 in March.
But the figure for April was more than double the 157 in the same month last year and analysis from accountancy firm Price Bailey says the number could surge in the coming months driven by a rise in the number of construction firms defaulting on covid loans.
Data obtained from the British Business Bank, a government-owned development bank, revealed that 2.5% of all borrowers in the construction and transport sectors had defaulted at least once on loans taken out under the Coronavirus Business Interruption Loan Scheme (CBILS).
This was almost twice the default of other sectors, such as arts and entertainments (1.3%) and healthcare (0.8%).
The default rate for construction and transport has surged over the past quarter, according to the analysis, and Price Bailey partner Chand Chudasama said: “[This surge] suggests that we are likely to see a high level of business failures for many months to come.
“Construction businesses are contending with both shortages of materials and labour and rising costs. Supply chain disruptions are making it harder for businesses to finish jobs to schedule and avoid financial penalties for late completion.”
Meanwhile, UK inflation edged up to 9.1% in the 12 months to May, from 9% in April meaning inflation is at its highest level since March 1982. Petrol products have gone up 84% in a year, the Office for National Statistics said, while metal, machinery and equipment has gone up by close to 21%.