Insolvency warning as industry faces mounting challenges | News

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More than 340 architectural and engineering firms have gone bankrupt since the start of the pandemic, according to the latest figures for England and Wales from the Insolvency Service.

There were 27 companies in the category that filed for bankruptcy in November, a year-on-year increase of 145% and only slightly down from the 2021 peak of 30 insolvencies in September.

Between March 2020 and November 2021, 343 businesses collapsed. According to the Architects Council of Europe, there were around 9,000 architectural firms across the UK in 2020, most of them being independent traders.

The Insolvency Service’s statistics do not break down industries at any level of detail beyond “architectural and engineering and related technical consultancy activities”. November is the last date for which there are figures due to the lag in reporting.

But the report shows that contractors and specialists have been the biggest losers in the construction industry as a whole.

The industry has been warned to expect more businesses to go bankrupt after figures showed the number of entrepreneurs going bankrupt rose by 25% between October and November, with 325 businesses going bankrupt over the course of the year. of the period.

That figure represented 19% of the 1,678 businesses that collapsed across all industries during the four-week period.

Construction companies accounted for a third of construction casualties, with more than half coming from skilled trades such as demolition and enabling contractors. Less than 10% came from civil engineering.

The figures have raised fears that numbers will rise this year as companies struggle to cope with rising inflation on labor and materials, after being burdened with fixed-price contracts a while ago several years.

John Bell, senior partner at Clarke Bell Insolvency Practitioners in Manchester, said: “The sector is being hit by many issues including rising commodity prices, supply chain disruptions, historic debts accumulated during the pandemic, labor shortages and being tied to fixed issues. prices contract as the rate of inflation rises.

“It is the combination of these difficult factors that leads to the insolvency and liquidation of so many construction companies.”

In its latest report on profit warnings, accountant EY Parthenon said yesterday that the number of companies across all sectors forced to issue profit warnings rose to 70 in the last quarter of last year, a 19% increase compared to the same period in 2020. .

And Ian Marson, the head of its construction business, said he expected a spike in the number of construction companies starting to struggle to start rising in the spring.

“I think it will continue to escalate,” he warned, adding that small and medium-sized businesses, which had dipped into their cash reserves to weather the pandemic, would likely struggle to cope with the rising material and labor costs.

Arcadis head of strategic research Simon Rawlinson said the latest insolvency figures “tell us more about the withdrawal of business support associated with covid rather than the immediate state of the construction sector. “.

He added: “The business protection measures introduced in May 2020 included six insolvency measures to give businesses breathing space to organize a business rescue. These measures were withdrawn at the end of September 2021, so the November 2021 data will be the first opportunity to assess the post-covid health of the sector.

But he admitted he expected “the level of insolvency to continue to rise as businesses grapple with current market conditions and covid-related debt”.

However, the latest RIBA Future Trends report revealed that architects were confident about workloads in the first quarter of 2022, despite projects continuing to be hampered by delays, shortages and inflation.

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