Public sector spending cut affecting building firms badly, finds report



Public Sector Spending Cut has Hit the Construction Industry Hard, Says Report by Wilkins Kennedy

Public Sector Spending Cut has Hit the Construction Industry Hard, Says Report by Wilkins Kennedy

The government spending cuts have hit the construction sector hard, if data released by business advisers Wilkins Kennedy is to be believed. Insolvencies in the sector have surged in the first quarter for the first time in two years, the report found.

The report said that total number of bankruptcies for the quarter has gone up to 948 from 796, a jump of 19 percent over the previous quarter.

As government fiscal stimulus dries up for public sector programs such as building schools for the future, number of firms becoming insolvent has also gone up, fuelling fears of prolonged a downturn.

“The government has slashed capital spending on infrastructure across the board in order to plug the deficit and that has pushed the construction sector into a double dip”, said Wilkins Kennedy director Anthony Cork.

“The question now is how quickly private sector construction work will be able to pick up the slack left by the public sector. So far this has not happened”, he said.

Another research conducted by Barbour ABI found that total value of new works awarded to British construction companies in the last twelve months to May has fallen by 39 percent to £21 billion. Nearly 40 percent of the constructions sector’s revenue comes from public sector spending.

The Office of National Statistics said construction output has dropped by 4 percent for the first three months of the year, the biggest ever quarter-on-quarter decline since the beginning of 2009. However, surveys conducted by industry paints a different picture showing steady growth since January after a snow-hit December.

“Many companies could be forced to pass their pain down through their supply chain, which will have a big impact on sub-contractors, electricians, plumbers and builders’ merchants”, said Mr. Cork.

Companies such as CJ Haughey Construction, John Laing Partnership, Rok and Connaught have gone into administration since Autumn last year.

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