This is a really interesting and relevant extract from a recent article on Construction Enquirer. Link to the original article below. The Challenges around Building Construction Costs.
Laing O’Rourke – the country’s largest private contractor – is struggling to raise funding.
So what hope is there for smaller building companies across the country?
Buildng firms are being starved of the finance they need to grow their businesses.
But no-one in Whitehall seems to have noticed.
The culture of caution developing is not just among lenders – but also insurers and accountants.
It is dragging the industry down at a time when the Government is trying to stoke up economic growth.
Carillion’s spectacular collapse burned many banks. But that is not a justification for choking off vital cash to well-run businesses that need loans to fund growth.
The depth of the problem is best illustrated by the plight of one firm that has been turned down by two high street banks for loans to fund modest working capital demands despite having assets of nearly £30m.
It is a precarious time for construction following the turbulence of the last year.
And the Brexit preoccupied Government has failed to recognise the liquidity crisis that is looming.
The problem is not on the scale of the financial crunch a decade ago, when bad debt contagion undermined the banks themselves constraining access to cash across the board.
This time around the banks are picking off the construction and property industry as being too risky for their loan books.
It is a dangerous policy that could tip the balance for many stretched firms threatening another wave of company collapses in a vital UK industry.
Banks cannot be allowed to switch lending away from construction on a whim.
The Government needs to get banks back into line to support the sector before it is too late.
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