KPMG warns ongoing uncertainty and tightening access to credit means number of stricken contractors set to rise

The number of building firms going into administration jumped by more than half in the third quarter, figures from KPMG have revealed.

The accountant said the figure increased from 49 in the second quarter, the period between April and June, to 76 the following quarter 鈥� a hike of 55%.

Firms that went under during the period included Pochin鈥檚, which collapsed in August after close to 90 years of trading.

blair index

KPMG鈥檚 UK head of restructuring Blair Nimmo said: 鈥淭he building and construction sector continues to feel the strain of the ongoing economic uncertainty across the UK, with a softening in activity and delays in investment for large construction projects.

鈥淚ndeed, there has been pressure throughout the whole supply chain, not least due to high input prices, all of which has resulted in a spike in the number of insolvencies.鈥�

And he warned that problems would get worse in the coming months.

鈥淸With] reducing credit insurance appetite, the declining availability of skilled labour and limited options to refinance and raise funding, it鈥檚 clear to see that pressure in the sector is only likely to increase.鈥�

He added: 鈥淯nless clarity and confidence return to the sector, financial distress and increasing numbers of insolvencies are likely to prevail.鈥�

There have been an increasing number of warnings about contractors鈥� access to finance in recent months following Carillion鈥檚 collapse last year.

In July Ian Marson, the UK head of construction at Ernst & Young, warned: 鈥淭he investors who were there three or four years ago are actively withdrawing from the sector and that is primarily down to margin. They don鈥檛 see this as a place they are going to get the returns they need for their own investors.鈥�

His colleague Mike McCartney, EY鈥檚 director of capital and debt advisory, told 黑洞社区 over the summer: 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�

Earlier this month, Laing O鈥橰ourke鈥檚 chairman Sir John Parker admitted he was relieved to have got the firm鈥檚 refinancing away earlier this year, adding: 鈥淯K construction remains in a troubled state. A number of key lending banks have signalled their exit from the sector; thankfully a few remain committed.鈥�

Other firms to have gone into administration this year include Shaylor, Welsh firm Dawnus and Interserve which went into administration in March but was rescued the same day under a pre-pack deal