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UK property downturn hitting construction industry hard

The industry is also warning that the recent attempts by the government to introduce measures in the Budget to help are too little too late.

The number of construction firms going out of business is up 15% from last year, according to the latest figures from Pricewaterhouse Coopers with 829 having gone into insolvency in the first quarter of 2009.

Meanwhile a report from business recovery and restructuring specialists Begbies Traynor shows that the number of construction firms suffering financial problems has increased by 126% in the first three months of this year compared with the first quarter of 2008.

Its Red Flag Alarm system shows that that the number of construction companies with critical problems rose 16% between the final quarter of last year and the first quarter of 2009.

Building firms in the North East showed the greatest rise, with a 149% rise in the first quarter of 2009 from the same period in 2008

'In spite of the initiatives taken by the government in this year's Budget to support the house building industry, it seems likely that there will be more pain for some time to come,' said Nick Hood, partner at Begbies Traynor.

'There is encouraging evidence that more credit is now being made available and that the rate of house price depreciation may be slowing, but with unemployment on the rise and housing sales still at a low level, any recovery in the industry seems some way off,' he added.

PwC does not predict a sudden change in the circumstances of construction firms. 'We expect the insolvency statistics to grow during 2009 particularly as the cash unwinding impact of a downturn in volume is experienced. Those that aren't planning for that now could get caught out,' said Jonathan Hook, construction and house building leader at PwC.