Scotland’s construction industry faces ‘unprecedented’ problems

Scotland’s construction industry faces an unprecedented sequence of problems likely to trigger further business failures, according to a restructuring expert.

Derek Forsyth, head of recovery at Campbell Dallas, is warning the combination of a marked fall in major public infrastructure projects, prolonged severe weather, the collapse of a tier-one contractor in Carillion and persistent economic uncertainty is affecting order books and compounding cash flow problems across the industry.

He said: “This is probably the most challenging period I have known for the construction sector. The industry is beset with an endemic cash flow issue that has never really been resolved.

“Businesses will retain cash for as long as possible, which tends to affect smaller companies trading from one job to another.

“Coupled with fewer contracts and the wider economic and weather issues, many companies are facing a very tough time.”

He said Carillion’s collapse exposed the vulnerability of smaller firms to the failure of a principal contractor.

He added: “Given that payment can routinely take six months or longer, it is unsurprising that banks are unwilling to increase borrowings when payment terms and compliance are so uncertain.

“Perhaps the banks need help from government to ease the cash flow problem.”

Derek Forsyth, head of recovery at Campbell Dallas.