Insolvencies for builders up 50pc despite housing crisis

A recent report states the number of builders going insolvent increased by almost 50pc last year, in the midst of a housing crisis where building services are sorely needed.

New figures compiled by Deloitte show 158 construction firms went into insolvency last year, compared to 108 in 2017.

Builders taking on contracts with fixed prices are being hit by rising costs of labour and materials.

In addition, a number of firms may have been affected by the collapse of UK builder Carillion.

One definite Irish victim of Carillion’s collapse was Sammon Contracting Ireland. It went into liquidation because a schools project it had been working on was put on pause when Carillion went bust.  “The increase in construction-related insolvencies reflects that there are still legacy issues at play in the sector,” said Deloitte partner David van Dessel, adding that cost inflation was having an impact on profitability.

The inflationary environment is having an impact on companies that take on fixed price contracts, Mr van Dessel said. He also said slowing growth in house prices is having an impact.

The figures will inevitably raise fears that the housing crisis will take longer to be solved.  The Deloitte figures show construction is lagging the rest of the economy, with insolvencies down 12pc overall.  The figures show, however, that only a handful of firms are availing of the examinership process – which offers insolvent firms a chance to be rescued.

Examinership means firms are given 100 days’ protection from creditors to see if they can work out a way to stay alive. Only 3pc of total insolvencies were examinerships, Deloitte said, adding that it encouraged company directors to avail of the examinership process. Deloitte warned that any hard Brexit may boost insolvencies this year.

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