Construction industry inWales ‘keeps steady in turbulent waters’
FIRMS in Wales’ construction sector are among the least likely in the UK under threat of going out of business, according to new research by insolvency and restructuring trade body R3.
With just 29.2% of firms at heightened risk, the construction sector in Wales is second only to Northern Ireland, at 28.2%, and remains 3% lower than the UK average of 32.9%.
Louise Durkan, chair of R3 in Wales and director at Deloitte, said: “It is fantastic to see the construction sector keeping steady in such turbulent waters, especially given the ONS’ latest rolling threemonth figures showing a 1.4% fall in output for the sector across the UK – the sixth consecutive contraction.
“With construction responsible for approximately 10% of Wales’ GDP, fortunately, concerns over potential future skills shortages and the impact of increases to the costs of imports, while undoubtedly rocking the boat, are not yet steering the sector completely off course.”
The sector has seen an increase of 2% in the level of insolvency risk over the past month, up from 27.1%. However, this increase has remained in line with the overall UK average.
However, not all sectors are faring as well. The technology and IT sector in Wales is the least stable of all technology and IT sectors in the UK, with 42.6% of firms at higher-than-normal risk of becoming insolvent in the next 12 months.
Of all 10 industry sectors monitored by R3 in Wales, technology and IT has the greatest risk of insolvency, followed by the professional services sector at 39.2%, and the transport and haulage sector at 31.2%, with agriculture close behind at 31.1%.
Ms Durkan said: “While the number of technology and IT firms in Wales at greater-thannormal risk of insolvency is high, this may be due in-part to the ‘start-up’ culture prevalent within the industry.
“The sector is well-known for its many small firms in their early stages, with limited staff and financial capital, which are likely to be represented as ‘at risk’, and therefore it is worth taking these figures with a ‘pinch of salt’.
“With this is mind, it is encouraging to see that Welsh tech-hubs, such as Swansea and Cardiff, continue to foster a competitive and entrepreneurial business environment, despite competition from the capital.
“On the other hand, the level of risk for the sector has been steadily increasing, up almost 11 percentage points from 31.9% in April.
“This may be due to a number of new challenges to businesses that have since arisen, such as pension auto-enrolment and an increase in the National Living Wage, which will have increased monthly financial demands.
“However, the Welsh sector now sits notably above the UK average of 39.8% – it will be important for firms to keep a close eye on the figures to see if this gradual increase continues over the coming months.”
She added: “For any companies that are starting to feel the strain now we are in the holiday period, seeking advice from a licensed and fully regulated insolvency practitioner at the earliest opportunity will allow for the greatest chance of rescue and recovery.”