The Construction Leadership Council’s Covid-19 Task Force survey has found that just 12% of applications for Government-supported loans have been approved for those in the construction sector.
Furthermore, around 30% of applications have been refused, with 58% of companies still waiting to hear back.
Research within the construction industry has revealed a major bottleneck of applications and a high level of rejections. Construction leaders are now calling for government-backed loans be streamlined for construction firms to avoid a “ruinous contractor liquidity crunch in the coming weeks.”
Predictably, SMEs have been hardest hit and many don’t have the resources to tackle the lengthy application process to get access to the funds they need. They also don’t have the luxury of time to wait for said funds to eventually come through. So a quicker application and assessment process would give them the vital funds they need to help them get through the pandemic.
The Construction Leadership Council’s Covid-19 Task Force also recommends that lenders should prioritise applications from those companies supporting essential works, such as hospital and utilities construction, if they’re facing immediate hardship.
Could construction companies benefit from bounce back loans?
The brand new 100% government-backed loan scheme for small businesses allows companies to borrow between £2,000 and £50,000, interest free over a 12-month period.
The scheme has been set up especially for small businesses who may need a vital injection of cash to keep their business going as many struggle through the lockdown measures imposed to help combat the spread of COVID-19.
However, many construction firms will be looking for support above its £50,000 threshold which is why construction leaders are calling on the Government to step in and guarantee 100% of loans under the Coronavirus Business Interruption Loan Scheme.
CLC joint chair Andy Mitchell said: “The Government has done an astonishing job putting in place ground-breaking financial support to UK businesses in very short order.
“The Coronavirus Business Interruption Loan, Coronavirus Large Business Interruption Loan Scheme and Covid-19 Corporate Financing Facility are a shot in the arm for our sector and UK plc.
“We want to help make sure this vital support makes its way into the industry, providing short-term liquidity as companies get back to work after the Covid-19 crisis.
“We hope to work with the Government and lenders to make sure this happens.”
Construction firms now encouraged to reopen
Boris Johnson’s latest address to the nation encouraged those in the construction sector to return to work. The prime minister did not lift the lockdown but acknowledged the impacts of the virus on the economy.
He said: “We now need to stress that anyone who can’t work from home, for instance those in construction or manufacturing, should be actively encouraged to go to work.”
“We must and will maintain social distancing, and capacity will therefore be limited. So, work from home if you can, but you should go to work if you can’t work from home.”
However, many in the industry warn that without help, a cash crunch will hamper this return to work and could generate a raft of business failures and a rise in insolvency in the construction sector.
Advice for the construction sector
If you’re a company owner operating in the construction sector and are looking for advice on what to do next, get in touch at [email protected] / 0161 907 4044.
We offer free advice, and can help you work out the best option for dealing with any cashflow problems your company is experiencing.