Construction insolvencies are down but "challenges lie ahead", the Scottish Building Federation has warned.

Commenting on the publication of the Insolvency Service’s Q3 statistics on the UK construction industry which show a 4.7% fall compared to Q2, Michael Levack, Chief Executive of the SBF, warned that the impact of the recession remains severe and that the industry faces a number of challenges in the months ahead.

A total of 106,000 construction companies across the UK have gone into administration in Q3 of this year according to the Insolvency Service.

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Michael Levack said: "The latest figures from the Insolvency Service suggest that the UK construction industry is in a better position than earlier in the year, however the industry remains concerned that things may well get worse before they get better. Tender prices are now fiercely competitive and without doubt in many cases below net cost, this may have serious future consequences."

He continued: "To hear that in the last three months of this year 106,000 construction companies in the UK have gone into administration reinforces the continuing struggle that the industry faces on the long path to economic recovery.

"To get back on track, the construction industry needs practical and tangible support from the government. In the Chancellor’s forthcoming pre-budget report on the 9th December for instance, slashing VAT to 5% on building works to encourage homeowners to spend more money on building works to improve their homes would make a huge contribution towards sustaining thousands of jobs in the construction industry."

(GK/KMcA)