THE North East’s construction sector has seen the highest rate of business insolvencies in the UK over the last five years as the economic crisis continues to hamper a recovery in the industry.

New data from information services company Experian shows that 531 building firms collapsed between 2007 and this year, which is the highest proportion of total insolvencies in the country.

Some of the biggest recent casualties have been Newcastle-based Dorin Construction, which lost almost 100 staff when it went under at the start of the year, and Whelan Construction, also in Newcastle, which saw nearly 50 workers lose their jobs when the firm closed last month following a fall in orders.

The Experian report compares each region’s construction companies by looking at a number of financial and non-financial criteria, including profitability, cashflow, payment history and timeliness of account filing.

Simon Streat, managing director of Experian’s SME business, said: “The construction industry, like many other sectors within the North East economy, has experienced an erratic insolvency rate over the past few years, generally staying higher than the national average.

“They are likely to have been impacted by the high level of insolvencies seen by all businesses within the region, causing many local construction businesses to lose key clients or vital suppliers. As a high-cash industry operating within tight margins, construction is highly sensitive to late or non-payment of bills.

“With late payments in the North East currently standing at three weeks beyond terms, this is going to have a huge effect on the cashflow of local construction businesses, making insolvency an ever-increasing possibility.”