Leading audit firm PwC  says that with the number of construction insolvencies likely to increase in 2012, major contractors must take a pro-active approach to managing risk in their supply chain.

The PwC figures reveal that nearly 10,000 construction and manufacturing businesses went into insolvency since the start of 2010. Since 2010 there have been over 5,000 construction insolvencies, with London alone seeing 927 construction insolvencies. Over 4,000 manufacturing firms went under in the same period.

PwC experts say that under the ongoing cloud of economic and unemployment uncertainty, 2012 could see the sectors faced with the same woes.

Jonathan Hook, head of engineering & construction at PwC said:

“2011 was another tough year for the construction sector and there were 6% more insolvencies in the sector in 2011 than 2010. Over the last two years we have lost more than 5,000 companies and the trend shows no sign of abating.”

There were 656 construction insolvencies in Q4 of 2011 and 424 for manufacturing. Across the year however from Q1 2010 to Q4 2011 manufacturing fared slightly better than construction which saw a rise of 6.4% in 2011. Q4 2011 was however slightly more positive for both sectors in comparison to Q3 of the same year where construction had 0.2% fewer insolvencies.

The UK regions that were most affected included London, West Midlands, Yorkshire region and the North West for both sectors.

Jonathan Hook continued:

“The cuts to the Government's capital programme and uncertainty around the economy and financing generally means there is little chance that 2012 will see this trend reverse. London reported a 5% decline in the number of insolvencies in the sector last year, highlighting that it is increasingly tough elsewhere in the regions, where we saw a 9% increase.”

Latest statistics released by the Office for National Statistics this week show that Construction output fell by 0.5 per cent in the last quarter of 2011.