Member Article

Construction and property sectors suffer increased administrations

The number of construction and property companies falling into administration increased by 11% in the third quarter of this year.

Dan Butters, partner in real estate at Deloitte in the North East, believes that rising energy prices and significant cuts to public and private sector building projects have brought many projects to a halt.

He said: “The next quarter is going to continue to be tough for the construction sector and will particularly hit medium sized firms as opposed to the larger national contractors.

“Whilst it is welcomed news that the Bank of England’s new mortgage approval figures for August 2011 increased to 52,000 - the largest approval rate in any month since December 2009, the housing market
still remains subdued.”

He added that favourably low interest rates have done little to stimulate sales in the housing market, as tough credit conditions have locked thousands of first-time buyers out of the market. Now only those with a substantial deposit are able to get a mortgage approved.

The research also highlighted that in the retail sector, the number of administrations fell by 20% to 28 in the third quarter of this year, compared with 35 in the same period last year.

Paul Feechan, partner for consumer business at Deloitte in the North East, said: “Whilst this may be taken by some as a positive sign that the industry is beginning to stabilise, retailers are coming under
increasing pressure as shop sales continue to slow.

“The recent failure of Alexon, the women’s retailer, may be an indicator of more to come for the larger underperforming fashion based retailers.

This was posted in Bdaily's Members' News section by Tom Keighley .