Finance and business advisor Grant Thornton UK LLP is warning the construction industry that while fewer businesses have failed during the second quarter of 2010, the future is still uncertain.
'Fewer business failures in the construction industry is a sign the sector is moving in the right direction despite the fact the decline is only a marginal 1.1% from Q1 2010, said Phil Westerman, head of construction and finance.

'Construction companies still face very difficult conditions which may worsen if more building projects are adversely affected following the government's Comprehensive Spending Review due to be published in October.

'It is encouraging to see some signs of recovery in the construction industry where administrations in the sector have fallen for more than five consecutive quarters. In addition, many indicators have pointed to incremental increases in property prices which may provide the impetus for some construction companies to resume developments.

'The UK economy is still quite volatile and public sector cuts are effecting the confidence of many construction firms, impacting on the pipeline for future work in the sector and leading to tough trading conditions which we will expect to see during the next two quarters of 2010 and beyond.'

The Q2 2010 provisional data, issued by the Insolvency Service shows 86 administrations of construction businesses. This is a 1.1% fall from the 87 construction company failures in Q1 2010 and a 4.4% decrease from the 90 administrations in Q4 2009. This is also a 22.5% drop from the 111 businesses that collapsed in the same period (Q2 2009) last year.