Rollercoaster ride for the construction industry shows wider uncertainty over the economy

Two studies into the construction sector have given very different pictures of the state of the building industry and have highlighted uncertainty in the wider economy. Recently released figures from the Office of National Statistics (ONS) have shown an improvement in construction sector output in July, in sharp contrast to poor performance earlier in 2013.

But this good news is tempered by research carried out by insolvency industry body R3 which reports that 30% of construction firms across the UK are at risk of failure in the next 12 months. The ONS figures show that construction output in July 2013 increased by 2.2% when compared to the previous month, whilst output was 2.0% higher than July 2012. Figures for the three months May to July showed an increase both in terms of the previous period and the same period in 2012.

Which leaves the question of why the output figures are improved but the outlook for the sector remains relatively bleak. The answer seems to lie in the depressed state of the building sector in previous years, which has meant that an improvement of the figures for 2013, whilst welcome, do not fully reverse the damage done to the sector in recent years.

As the economy still struggles to make positive steps forward, the construction industry, especially away from the south east, is continuing to struggle and an oversupply of contractors is continuing to cause problems in terms of downwards price pressure and limited numbers of new projects getting off the ground.

We have seen a growing number of construction industry clients turning to us for help in recent months. They all tell a similar story, of slim margins and delayed payment, plus the knock-on effect of their customers going bust.