A group representing North East SMEs in the construction sector is calling for action from local councils to stop firms falling into administration in 2024.

The call from Construction Alliance North East (CAN) comes after many local construction companies were hit by the high-profile failures of the larger Tolent and Metnor companies early in 2023. CAN is calling for talks with councils around the region, saying that improvements to the planning system, prompter payment of bills and better procurement systems would help protect local SMEs in the building sector from similar troubles.

A fall in output from the construction sector - caused in part by one of the rainiest Octobers in the last 200 years - last week contributed to a fall in UK GDP. Meanwhile, figures released at the end of last week showed that the number of insolvencies in the region was rising steadily, with the number of companies going out of business in 2023 already above the level of 2022 with one month left to go.

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A statement from the CAN board said: “We are hearing more and more from our network about the difficulties that planning delays are causing, not only directly with contractors but also businesses across the wider built environment landscape. Unfortunately, a reliance on getting planning decisions over the line means contractors have their hands tied by what appears to be a deterioratingly poor service but it can put projects back by several months without knowing when an additional delay might be thrown into the mix without notice.”

The organisation’s chair added that smaller firms in the region’s construction sector needed more help from local authorities. Ken Parkin said: “Far too often we are seeing SME firms in the North of England who get overlooked for projects, instead missing out to national rivals. When they do actually get an opportunity to tender and win projects, it’s therefore important that planning timeframes and deadlines are met.

“There are widespread benefits of employing SME contractors. Not only do they bring local knowledge and better value for money, but the money spent contributes back directly to the regional economy.

“Regional firms have a soul that is currently being diminished by local authority red tape. They align with key values that the CAN board heralds, which include fairer payment, usually to 30 days terms, they provide direct employment and use a train and retain model of apprenticeships which lead to the natural development of the next batch of regional construction managers.

“If we don’t look out for our regional contractors, who generally build better quality and uphold quicker response and turnaround rates, then we run the risk of them falling into financial difficulty, and potentially, in extreme circumstances, administration.”

CAN was formed in 2015 to give smaller firms in the North East construction sector a stronger voice in making bids for public sector work. The alliance brings together regional branches of the Northern Counties Builders Federation, Civil Engineering Contractors Association, the Federation of Master Builders, and the National Federation of Builders, who together represent hundreds of local businesses.