EY senior figures point finger of blame at last year鈥檚 collapse of contractor for 鈥榮hattering lender confidence鈥�

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Contractors have again been warned that nervous banks are pulling down the shutters on lending to the industry in the wake of Carillion鈥檚 collapse last year.

Last month, Ian Marson, the UK head of construction at EY, said the volume of profit warnings since the beginning of the year is expected to push the 2019 figure beyond levels not seen since the last recession.

And his colleague Mike McCartney, EY鈥檚 director of capital and debt advisory, said: 鈥淐arillion was a catastrophic moment in shattering lender or institutional confidence in the sector 鈥� there鈥檚 no other way of looking at it.鈥� 

McCartney said many banks are making it clear they do not want to be writing new business with construction firms.

He added: 鈥淲hether that鈥檚 conveniently pricing new proposals so high they鈥檝e effectively dealt themselves out or otherwise saying 鈥榶es, we鈥檒l do a deal but here鈥檚 our long list of terms and conditions that we need you to agree鈥�, which makes it so commercially impractical, they鈥檝e effectively dealt themselves out.鈥�

Marson said banks have not completely pulled the plug on the sector but admitted: 鈥淚t鈥檚 terrible is the best way of describing it. Banks have zero optimism bias [towards construction] right now.鈥�

Last week, Costain said pre-tax profit more than halved in the six months to June because of a legacy scheme it completed more than a decade ago.

The boss of one listed contractor admitted banks were willing to lend 鈥渂ut only to firms with good balance sheets鈥�.

In its last set of results, the country鈥檚 biggest builder, Balfour Beatty, highlighted its 鈥渟ector-leading鈥� balance sheet with net cash at the half year increasing to 拢425m and average net cash for the first six months at 拢290m. 

It said this would rise to between 拢280m to 拢300m at the year end, an average 拢50m higher than its previous estimate.

Balfour Beatty chief executive Leo Quinn said some firms had taken on too much debt in order to fuel growth.

鈥淭he problem this industry has had is forced growth,鈥� he said, when announcing an improved set of half-year results earlier this month.

Galliford Try and Kier, who have both issued profit warnings this year and embarked on a cost-cutting programmes, are due to announce their full year results next month.

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