Banks have been steadily cutting lending to construction companies over the last six months.
Latest figures from the Bank of England show that lending from banks to firms in key subsectors, including house building, commercial construction and civil engineering has recorded the longest period of decline since 2011.
The developing construction credit squeeze follows the collapse of Carillion and growing unease about the impact of Brexit on housing and commercial property.
During the period from March to August total lending to construction companies fell from £34.5bn to £32.6bn.
One regional contractor told the Enquirer: “It all started to happen after Carillion, several banks just refused to extend overdrafts and credit facilities.”
Mark Farmer, CEO at Cast and author of a government commissioned review of the construction industry, said: “The six consecutive months of decline in lending by banks to the construction industry adds more uncertainty to the sector’s ability to innovate.
“With Tier 1 contractors facing cash flow problems as we’ve seen in Carillion’s case, restricted finance puts pressure on an outdated delivery model built on so many layers of passing down risk and accountability.
“Together with recent warnings from the Bank of England of a drop in house prices post-Brexit, the construction sector faces difficult challenges.”
