Mid-sized construction firms hardest hit

Mid-sized construction companies have been hardest hit since 2007, according to global information services company Experian.

Experian’s snapshot analysis of the construction sector between 2007 and the present day shows that mid-sized firms, with 26-50 and 51-100 employees, lack the flexibility and low overheads of smaller players, yet struggle to compete with the financial clout and resources of their larger rivals.

The analysis has also revealed that although insolvencies within the sector have stabilised, the overall financial strength has dropped to a lower level than during the 2009 slump, led mainly by the mid-sized businesses. The smallest and largest firms within the construction sector were the least affected, seeing lower comparative insolvency rates than the mid-sized firms.

Key highlights from the analysis include:
•The largest firms (501 employees or more) saw their financial strength score remain above 80, indicating relatively robust financial health
•The smallest firms (up to 10 employees) saw their average score fall as low as 78.6 in May 2010, but these firms still managed to outperform or match the average score for the sector as a whole during 2007-2011
•Mid sized firms – with 26-50 and 51-100 employees - saw their scores fall as low as 77.3 and 76.6 in January 2010, but both categories have seen a moderate improvement since, rebounding to reach 78.14 and 78.34 by June 2011
•Companies with between 26-50 employees were the most at risk during the period, with an average insolvency rate of 1.11 per cent since 2007
•Regionally, the North East of England proved to be the least resilient area of the UK for construction, consistently showing the highest insolvency rate since 2007 – 0.7 per cent of the total business population.

Simon Streat, managing director of Experian’s UK SME business, said: “The challenging conditions in the construction sector mean that competition is now fierce and larger firms are bidding for the smaller contracts that they would have normally passed on.

“As a result, both the smaller and mid-sized companies are having to look further and wider for new business and offer more competitive prices than their larger counterparts. Smaller construction firms that have lower overheads and more flexibility are managing to work around this, but mid sized firms are finding their revenues increasingly squeezed while still having to maintain the same basic outgoings.

“The fact that insolvencies have stabilised is a positive sign, but with financial strength of these firms remaining at a low level, it indicates that they are not out of the water quite yet. It’s vital, therefore, that these vulnerable mid-sized businesses take action now to safeguard their operations. This means changing the way their find new and target customers and tying new customers into robust and stringent contracts to protect against late or non-payment.

“It is also wise for these firms to pay close attention to economic data such as insolvency rates and financial strength scores. This data often points to the areas of the country where profitable contracts can still be found, as well as the areas where businesses need to exercise caution before pursuing a contract.”

Your News

If you've got a story that would be of interest to Builder & Engineer readers, send us an email

Features

2016-07-25 10:35

The UK has an ageing population – effectively, this means that for the first time ever there are more people of pensionable age than children under the age of 16 in this country.

2016-07-05 10:05

Defibrillators located on construction sites can save your life. Rosa Mitchell from independent supplier Defibshopgives her advice.

CONSTRUCTION workers are often faced with a multitude of dangers at work, from the risk of electrical hazards to excavation and trenching accidents.

2016-07-01 10:06

Claire Cameron investigates the topic of daylighting and how the use of windows and rooflights can help bring sunlight into buildings all year round.

WITH increasing energy costs and concerns about global warming, the use of windows and rooflights to bring sunlight indoors is gaining momentum as more people look to natural sources to save money and the environment.

2016-06-28 12:48

Within days of the announcement of the Brexit vote, we’ve seen major construction company stocks crash by almost a quarter, says Chris Ingram, managing director of Cornish-based underfloor heating specialists Continental Underfloor.

2016-06-15 15:36

Commercial vehicles can drive success. Claire Cameron looks at why firms should upgrade and whether it is best to buy or rent a new fleet. With expert advice from David Brennan, CEO of Nexus Vehicle Rental, Dominic Reid of Northgate Vehicle Hire, Gareth Jones of Dawsonrentals Vans and light commercial vehicle industry consultant Tim Cattlin.

2016-06-08 10:21

The UK’s European Union referendum is proving to be a hugely divisive topic with the population split between leaving and staying. A potential Brexit on June 23 could have far-reaching consequences throughout almost every aspect of life from house prices to immigration policies. But what would leaving the EU mean for the construction sector? Those working in the industry give Builder & Engineer magazine their views.

2016-04-29 14:32

With female representation in the UK engineering sector the lowest in Europe more needs to be done to encourage women into the industry. Claire Cameron reports.

2016-04-15 15:22

In January, the government announced a £1.2 billion starter home fund to prepare brownfield sites for new homes.

Free E-newsletter Sign-Up

Sign up for our free e-newsletter

Looking for a company or service?