News of property giant Connaught’s collapse into administration, coupled with the threat of potential further cuts in public sector spending outlined in the forthcoming Comprehensive Spending Review, has left the construction industry feeling anxious about its future, according to Bibby Financial Services.
Government's announcement, that 77% of the nation's deficit reduction will come from expenditure cuts, has already had a considerable impact on the construction sector, particularly as public sector spending on construction projects represents around 40% of the industry's turnover.

The decision to scrap initiatives such as the Building Schools for the Future programme came as a blow to the sector and with more programmes under threat, the industry is bracing itself for further challenges ahead.

'With radical cuts being made in the investment of new construction projects and the Comprehensive Spending Review just around the corner, it's understandable that the already fragile UK construction industry is feeling nervous,' maintains Jason Heath, construction specialist at Bibby Financial Services.

'The sector relies heavily on government expenditure and the threat of further cuts, which are expected in October's Review, could cripple recovery in the industry, which has already been severely hit by the recession.

'As a result, many of our construction clients are deeply concerned about where future work will come from as they are already suffering the knock-on effects of this loss of income into the sector.

'Indeed, our own research* shows that output has fallen significantly during the last quarter and more than 20% of firms are finding business tough and are struggling to survive.

'With this in mind, it should be a priority for all contractors and sub contractors to make sure their cash flow is robust and watertight given the volatile nature of the sector.

'The successful firms will be those that have managed their cash well to ensure they are in a strong position to weather the storm.'

Alternative cash flow solutions, such as invoice finance www.bibbyfinancialservices.com/what-we-do/products/factoring.aspx , can provide firms with an immediate and ongoing injection of cash into the business against the value of outstanding customer invoices.'

* Research conducted on behalf of Bibby Financial Services in July 2010 for the Business Factors Index, based on a series of interviews with more than 500 business leaders across the UK.