Eleanor Temple, R3

Slow start to the year for Yorkshire construction sector

January is once again proving to be one of the toughest months of the year for many sectors with construction companies in Yorkshire seeing rising levels of firms at higher than normal risk of insolvency, in line with much of the UK.

According to the latest research by R3, the number of construction businesses at higher than normal risk of insolvency grew by 7.7% between December and January, slightly above the national month on month increase of 7%. In Yorkshire, over 9,000 of the nearly 26,000 active construction firms now fall into the overall negative band, representing just over a third (36.3%) of businesses in the sector here – close to the UK-wide figure of 35.4%.

The worst performing region was the South East with 38.3% of construction businesses at higher than normal risk, and the strongest region in the sector was Northern Ireland with just 30.8%.

While all sectors across the UK experienced an increase in levels of companies in the overall negative band since December 2017, Yorkshire performed relatively strongly in some sectors. The number of restaurants in the region at higher than normal risk in January matched the national average of 27.5%; and there were fewer pubs here at risk with 26.9% compared with 27.5% nationally.

“Traditionally, January is one of the hardest months of the year for many businesses and 2018 is proving to be no exception. With construction often seen as a barometer of the economy, it is worrying to see that it too is suffering. It will be important to look out for any potential knock-on effect on other sectors,” says Eleanor Temple, chair of R3 in Yorkshire and barrister at Kings Chambers in Leeds.

“Brexit uncertainty and wobbling confidence have led to a softening in demand and this is being exacerbated by fiercer competition, which is driving down prices in the construction sector and resulting in reduced margins and higher risk of insolvency. Output has fallen in both the second and third quarters of 2017 and output growth has been confined to housebuilding.”

Ms Temple continues: “However, Yorkshire is continuing to hold its own when compared with many other parts of the UK, and the region has a track record of resilience, even in tough times. Construction businesses need to batten down the hatches, keep a close eye on cash flow and profit margins, and seek professional advice at the first signs of financial trouble.”

R3 uses research compiled from Bureau van Dijk’s ‘Fame’ database of company information to track the number of businesses in key regional sectors that have a heightened risk of entering insolvency in the next year.

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