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Contractors working in the construction industry are being urged to exercise caution amid a sharp rise in the number of construction firms going bust in the UK.
According to data from the Insolvency Service, an average of 266 construction businesses collapsed each month in the three months to October 2021.
Experts have blamed rising material costs and a shortage of skilled workers for the closures, which are most likely to affect specialist sub-contractors.
In the wake of Carillion’s collapse, construction industry chiefs have called for action to tackle bad payment practices.
Mark Castle, chairman of Build UK, spoke to Construction News about the need for “consequences” for bad payers, calling for more transparency to expose the industry’s worst offenders.
“When you have companies that have poor payment practices there has to be consequences for those companies, particularly when it comes to winning work,” he said.
Amongst all the good news and continued belief in the buoyancy of the UK’s economic performance, an elephant has been lurking somewhat awkwardly in the room: an acute lack of skills.
Rough estimates proffer that the Construction industry requires over 44,000 new entrants to the sector to keep pace with demand and to regenerate an ageing workforce. The UK also needs to be bringing thousands more engineers to the workplace than it is currently doing. To put it bluntly, there aren’t enough skilled personnel coming into the workplace across UK industry.
A major change to the way that VAT is paid on building and construction invoices has been delayed again, this time until 1 March 2021.
At the end of May, HMRC said that the domestic reverse charge rules for the construction industry would commence on 1 October 2020. However, a week later, the tax authority confirmed that this would be pushed back by five months, due to the impact of the coronavirus pandemic on the sector.
The Chancellor’s most recent Budget contained new measures to combat VAT avoidance by companies in the UK.
As part of the Treasury’s strategy to combat ‘missing trader’ VAT fraud, contractors in the construction industry will have to grapple with confusing changes to the VAT system that could affect their cashflow.
There are troubling signals for contractors in the construction industry as Carillion is forced into liquidation and sector output dips dramatically.
Contributing £90 billion to the economy each year, the construction sector is one of the largest in the UK. It is highly reliant on self-employed workers, with 800,000 of the 2.9 million people working in construction self-employed.
Carillion, the second largest construction company in the UK, went into liquidation on Monday after the company’s banks refused to lend it more money.
Business confidence amongst the UK’s construction leaders – and many other firms in between – remains tip-top according to the latest research from accountants and business insight providers BDO.
With an employment index rating of above 113.0, the growth indications for UK construction remains a long-term trend and beyond: employers intend to keep on hiring, because there is work to be done and more is on the way.
Umbrella.co.uk's Jessica Evans joined us to chat over the latest good news for UK construction contractors: “The continued recovery – in fact, resurgence – of the UK’s building industry has really fuelled this continuous feelgood factor around the sector.”
