The results of the latest RealBusinessRescue.co.uk Business Distress Index data analysis for small and young businesses has revealed significant financial distress for a number of construction firms, as the UK feels the impact of coronavirus.
As well as analysing the increasing number of construction start-ups in distress (businesses aged three years and under), which has leaped 20% (to more than 10,000) in Q2, the research found that more than 67,000 construction SMEs are also in significant distress – an increase of 4% since Q1 2020. The uncertain future at these SMEs in significant distress is effectively putting 120,000 jobs at risk in an important sector for the economy.
Contruction represents 13% of all 520,000 SMEs in distress across all sectors, coming second behind small to medium businesses in the support service sector (16%), and followed by real estate and property companies (11%).
Shaun Barton, National Online Business Operations Director at RealBusinessRescue.co.uk, said: “It is clear that the impact of COVID-19 on the construction industry has been marked. Many sites halted activity after lockdown and were effectively mothballed for several weeks, which has adversely affected an increasing number of start ups in the sector and the job security of 120,000 employees.
“The reduction in activity and the impact on cash flow means that for many the future is a real financial challenge as they rely on a bounce back as activity resumes.
“The Government commitment to ambitious house building targets and general infrastructure spending remains in place and this, together with pent-up consumer demand, may help the sector to rebound in the future.
“However, young construction firms will be doing all they can in the short term to ensure they can survive and be in position to benefit from increased activity levels when they return.”
"The hopes of a V-shaped recovery might be fading after the latest economic growth figures and the findings from our analysis demonstrate that SMEs have been hardest hit by the pandemic with 16,000 pushed into distress."
The data in this report comes from the business intelligence company Red Flag Alert and was pulled from the end of Q2 2020 (March 31st 2020), analysing in excess of 3.7 million companies.
Red Flag Alert has been measuring and reporting corporate financial distress since 2004. Through its algorithm, the Red Flag Alert measures corporate distress signals, drawing on factual legal and financial data from a wide range of relevant sources, including intelligence from the UK’s leading insolvency business, Begbies Traynor.
