I have seen some recent statistics that suggest, earlier this year, that there has seen a slight improvement in the number of insolvencies within the construction industry. Only slight though.
Obviously this is good news, but from what I have seen and heard I don’t think we will see a major improvement for a while yet.
Over the last few years I have dealt with a number of companies in the construction sector that have fallen on hard times. One of the common threads cited as causing the problem is being priced out of the marketplace due to competitors winning work with impossibly low tenders.
Companies have been winning work by quoting low, with little or no margin, hoping that they will eventually turn a profit as a result of variations etc. as the project goes forward. This has, as mentioned above, caused problems for those that have priced a job properly as inevitably the cheaper deal will get the job. However, this option is a high risk strategy and as time has moved on these projects are being completed and the anticipated variations and extras are not materialising, leaving the low quoting contractor facing heavy losses and possibly insolvency.
This has been going on throughout the construction industry; affecting the large and the small players alike and I expect there will be financial disruption for some time to come as a result.
