Building trade hardest hit in business failures

NEARLY 40% of business failures so far this year are in the construction and engineering industries.

This is according to the insolvency statistics and analysis for the first six months of this year by Farrell Grant Sparks.

The report noted the increase is indicative of high costs, under-capitalisation of new businesses and consolidation within the sector.

“The problems are exacerbated by increased competitiveness following admission of accession countries to the EU and profit margins not being passed on by main contractors to sub-contractors,” stated the report.

Failures within the hospitality services have reduced by almost half, indicating development of the sector.

In contrast, there are increased failures in the retail industry — 25 businesses have failed in the first half of 2006 alone.

Nearly 200 companies were placed in liquidation, receivership or examinership since January, down 6% on the 208 failures in 2005.

Changes in regulation within the security industry have had a significant impact on business failure, with failure rates more than doubling from the same period last year.

The report claims that a number of companies have not been in a position to attain the criteria required as part of the new licensing laws.

In the IT industry, it appears lessons were learned from exuberant spending prior to the dot-com bubble burst and coupled with better capitalisation, failure rates have decreased, the report said.