245% increase in Scottish construction insolvencies

Figures from the Office of National Statistics, recently published by the UK Insolvency Service, show that the number of construction companies in Scotland entering compulsory insolvency jumped from 14 in the second quarter of 2009 to 48 in the last three months of this year.

Scottish Building Federation chief executive Michael Levack said the 245% increase paints a worrying picture of the continuing impact of the economic downturn on Scotland’s construction sector.
 
Furthermore, the compulsory liquidations from Q1 2010 to Q2 2010 has risen 14.5% from 42 to 48 construction firms.
 
Meanwhile, the number of Scottish firms in the construction sector subject to creditors’ voluntary liquidations rose 120% from 10 to 22 in last three months of this year. Whereas, the number of Scottish construction firms enter creditors’ voluntary liquidations rose 215% from seven to 22 in last three months of this year compared to the same period as last year.
 
Mr Levack said: “Seeing in black and white that 48 Scottish construction companies entered compulsory insolvency in the second quarter of this year, compared to 14 in the same period as last year, is a stark reminder that it’s grim out there.
  
“The Government must apply immediate pressure on banks to appropriately lend in order to save the construction industry.”

Mr Levack was supported by Stuart Brodie of finance and business advisors Grant Thornton in Scotland, who said: “Construction is key to our recovery and at the very least these figures show that local building companies need support – quickly.”

The Q2 2010 provisional data, issued by the Insolvency Service shows 86 administrations of construction businesses in England and Wales. This is a 1.1% fall from the 87 construction company failures in Q1 2010 and a 4.4% decrease from the 90 administrations in Q4 2009. This is also a 22.5% drop from the 111 businesses that collapsed in the same period (Q2 2009) last year.

Stuart Brodie, for finance and business advisors Grant Thornton in Scotland, said: “In Scotland we are seeing the exact opposite to what is happening in England and Wales and that is very serious. Over the last five quarters, England and Wales has seen a steady decline in the number of construction companies going into liquidation. Over the same period, the number of Scottish construction firms failing has risen.”