Richie Hales called for better communication in supply chains. Credit: via Camargue

Insolvency risk may rival inflation threat, says T&T

In its latest report, consultancy Turner & Townsend has alerted clients to a scenario that has seen UK construction insolvencies rise 72% year-on-year.

As inflationary pressure persists, the global professional services business’ latest UK Market Intelligence Report (UKMI), warned clients to take a pragmatic approach to project and programme delivery to help tackle both inflationary and insolvency threats.

The insolvencies figure runs to the second quarter of this year.

Richie Hales, regional infrastructure director at Turner & Townsend said: “Insolvency risk is becoming a growing issue in the North West across all supply chains as the long-term impact of the pandemic is realised alongside the conflict in Europe which is increasing raw material costs.

“The tell-tale signs of insolvency risk include low productivity, difficulty securing labour or materials, and failure to pay suppliers. We need to be prepared, build trust and develop open communication with our supply chains.”

The potential return of rising insolvencies shows economic reality catching up with the sector, following the end of the furlough scheme in September 2021, and the end of the temporary easing of insolvency rules in March 2022, said the firm.

Across the economy, SMEs are most at risk of failure, impacting construction significantly, as 98% of construction businesses are SMEs.

Turner & Townsend has also revised its tender price inflation forecasts in the UKMI. While still high, the report’s estimate for 2022 in real estate has been adjusted slightly to 8.7%, an uplift from 8.5% in spring’s UKMI – although sustained higher inflation is still expected to persist, with 4.5% forecast for real estate tender prices in 2026.

Across the infrastructure sector the situation is more pressured, with the business raising estimates for 2022 up to 8% compared with the 6% forecast in spring’s report.  It’s forecast for this market in 2023 is also higher, at 5% up from spring’s 4.5%.

Hales continued: “Our sector is at the heart of driving forward positive change – with programmes in the North West such as the Transpennine Route Upgrade, Media City Phase 2, A66 upgrade and growth within health and life science helping us level up our region, bring forward social value, and achieve the transition to net zero.

“For this potential to be met, risk in project delivery must be minimised.  This will take programmatic decision-making that plans for the full lifecycle of projects – looking beyond low-cost bids and instead assessing the sustainability and robustness in the financial credentials of firms, and their ability to deliver and their passion for delivering lasting positive change.”

The full report is available online.

Your Comments

Read our comments policy

Related Articles

Sign up to receive the Place Daily Briefing

Join more than 13,000 property professionals and receive your free daily round-up of built environment news direct to your inbox


Join more than 13,000 property professionals and sign up to receive your free daily round-up of built environment news direct to your inbox.

By subscribing, you are agreeing to our Terms & Conditions and Privacy Policy.

"*" indicates required fields

Your Job Field*
Other regional Publications - select below