North West housebuilders continue to struggle despite upturn

Despite some signs of recovery in the property market, research by R3 shows that house builders continue to face tough challenges with over a third (34%) of firms in the North West showing a higher than normal risk of failure in the next 12 months. This figure is slightly above the national figure of 32%.

By comparison, 26% of all businesses have a higher than normal risk in the North West overall (25% across the UK). The research was conducted using Bureau Van Dijk’s ‘Fame’ database and comes after the government announced the launch of the second phase of its Help to Buy scheme to assist first-time buyers and home movers to acquire a new-build home.

The R3 research show that over 7,206 firms in the UK involved in constructing domestic buildings have a higher than normal risk of insolvency, 588 of which are in the North West.

Jeremy Oddie, North West chair of R3 and head of recoveries at accountants Mitchell Charlesworth, comments:“While we have seen signs of an upturn in the property market and an increase in demand for new homes, the recovery remains fragile and it is still too early to talk about the construction sector having turned the corner.

“The sustained downturn has hit the reserves of many house-builders and they face the additional hurdle of securing finance for development. The larger firms with deeper reserves are best placed to survive, and small firms may well be cushioned by demand for extensions and renovations, it is the mid-market firms that face the biggest struggle.

“It will be interesting to see whether Help to Buy has a short-term impact on the health of home-building sector. It will be a long time before we see the type of speculative development that we witnessed during the property boom, but if growing demand can translate into new projects getting underway it may be the light at the end of the tunnel for some homebuilders.”