Since the economic downturn many businesses within the construction industry have been hit, with some facing some form of insolvency procedure. Recent Insolvency figures have shown that 23% of all business failures have been in the construction industry. With the impact of the Credit crunch this has put people in a position where they can not afford to relocate and move house or apply for a new mortgage. This having a damaging effect on the construction industry also there would be a negative impact on work for people in the architect industry.
Construction before the Credit Crunch
Pre 2007 the construction industry was thriving, house prices were at an all time high, 110% mortgages were being issued and demand for homes meant new builds and plans were being rushed through. However, the inflated house prices and irresponsible lending took its toll on the economy and the UK was thrown into a credit crunch. As a side effect of the recession house prices dropped, mortgages stalled and plans for new builds were wrapped up in red tape. This hit the construction industry on many levels, the obvious being that new homes were not being built but as a knock on effect to the credit crunch businesses struggled and commercial building was also put on hold. The construction relied heavily on public sector work but the public sector was hit very very hard, many quangos who were in charge of construction projects were wound down and local councils and trusts saw a sharp decrease in budgets.
Avoiding Insolvency
There has been some light in the construction at the end of the construction tunnel as home owners could not afford to move and therefore invested in home improvements and extensions, however this benefited smaller, cheaper companies. There are also opportunities in the commercial construction sector as businesses are getting smaller, more streamlined, therefore needing smaller offices, this leads the way for property managers to need to segment off larger office space into small offices so 2 or 3 businesses can fit into an area that previously only one would have occupied. The construction industry is looking promising as the credit crunch takes a turn for the better, however only companies that manage their debts and cash flow effectively through the hard times will get through. There are still opportunities for the construction business to thrive and Lines Henry can help if you speak to us soon enough to prevent insolvency, however if you leave it too late you may need help winding up the company.