Number of construction companies suffering critical financial problems leapt to 1,214 in third quarter according to ‘red flag’ survey

The number of construction companies facing critical financial problems has increased 41% over the last year, figures from business restructuring specialist Begbies Traynor reveal.

The firm’s red flag alert system registered 1,214 construction firms in critical distress in the third quarter of 2011 compared with just 860 in the third quarter of 2010.

Gary Lee, partner at Begbies Traynor, said: ““There has been a decline in new construction orders over the last 12 months as the sector is vulnerable to reductions in both capital and revenue spending by the public sector through central and local government and by private sector businesses trying to conserve cash.”

Begbies Traynor class any firm with county court judgements totalling £5,000 or more or companies subject to wind-up petitions as being in a critical state.

However, a fall in companies experiencing less serious financial problems over the same period meant there are actually fewer construction firms in financial trouble than there were last year.

The number of firms facing ‘significant problems’ fell from 12,533 to 11,187. This resulted in a fall of 7% in the number of firms with either significant or critical financial problems between the autumn of 2010 and the third quarter of 2011.

Lee said that the Olympics had been responsible for keeping some businesses in the south east in good health but that elsewhere in the UK the outlook remained difficult.