Why are UK Contractors Going Bankrupt?

Ongoing reports in the media suggest that times for the UK construction industry aren't altogether rosy as a number of contractors have gone bust over the last twelve months. Some of these are big name, respected companies being forced to let a number of staff go. The big question is why? We suspect there is no one, simple answer.

The Brexit Effect

Brexit, both in the run-up to the Referendum and after, certainly caused a wobble to the stability of the economy. Although latterly we have seen the £1 falling in value, as yet the outcome of Brexit is still in the air.

Early last year, the Construction Products Association, although concerned about the uncertainty, predicted that UK construction would grow to the tune of 3.6%. In reality, the growth recorded in the first three quarters of 2016 was just 0.6%.

The third quarter of 2016 also saw a '10% fall in new orders in the commercial sector'; this will have a knock on effect for this year and beyond.

Housing construction took a hit last year too, not only due to Brexit fears but also when stamp duty increased on second homes. Shares in many of the big house building firms dropped as much as 20%. Will the government's latest White Paper on housing help? It sets out to 'fix the housing crisis' for the small builder and the occupants. Will this ensure a healthier approach for the UK construction market?

Product Costs

Alongside all of this we have seen the cost of materials soar, putting pressure on quotes for existing jobs and possibly out-pricing up-coming projects.

To illustrate the point, the Mayor of London, Sadiq Khan instigated enquiries into the spiralling costs of turning the Olympic stadium into the football stadium for West Ham and the ever-controversial costs for the tax-payer of the Garden Bridge.

The Future: Skills Shortages

Rearing its ugly head again is the fact that the industry has huge skill shortages. This has become even more of a perceived future problem, if or when the freedom of movement that being part of the EU afforded the workforce is quashed.

Many skilled workers from Eastern Europe supplement the gaps in market. If Brexit doesn't manage to negotiate any reciprocal deals, this could have a big effect on contractors being able to complete jobs on time and on budget.

A survey carried out by readers of Building Magazine have made their views very clear on those with which skill-sets should be afforded freedom of movement in the post Brexit deal. Whether or not May can negotiate this is an entirely different problem.

Another question is, do the job losses caused by the closure of many of the contractors that have gone into administration offer an intermediate solution? The long-term answer is to train more with the necessary skill sets and make the opportunities attractive.

Can We Help?

We have plenty of opportunities for skilled professionals in the UK construction industry - quantity surveyors at all levels, surveyors, estimators, engineers, project managers and more. Don't miss out on the opportunities, make sure we have a copy of your up-to-date CV and keep an eye on our jobs pages.

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Steve Thomas
Director - Hong Kong & UK Construction Recruitment Specialist